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i— N A SH —A N N A L S—
C L E A R IN G -H O U S E C E R T IF IC A T E S A N D T H E N E E D FO R
A CEN TRA L BAN K

B y W illiam A. N a s h ,
. President Corn Exchange National Bank, New York.

It is universally conceded that the present time is highly favor­
able for financial reforms. The great danger is that the remedies
will be so numerous, and the diagnoses so differing that the patient
will linger and suffer. Not only here to-night, but in Washington
to-morrow and for months after, the doctors will assemble and dis­
cuss. I hope, to use an old story, we shall not have to wait for
the autopsy to find out what is the matter.
The brief contribution that I shall make on this occasion
towards the solution of the riddle of American finance is based on
my life as a banker in the City of New York, and what I have
learned in my relations with the New York Clearing House.
When I read the numberless projects for our financial well
being that fill the newspapers, our book shelves, and soon, the
Congressional Record, I ask myself on what do these men base
their plans, on observation or actual contact and familiarity with
the subject they talk about, and I must conclude that much of it
is spun out of their inner consciences.
The best known of our Revolutionary orators said, *T have
but one lamp by which my feet are guided, and that lamp is expe­
rience,” and I propose to use experience in the few minutes at my
disposal.
When I was a youth I saw the panic of 1857. The failure
of the Ohio Life and Trust Company created a distrust of banks
generally all over the country. It began as always in New York.
Good and bad banks alike were attacked by uneasy depositors
and they were fought to a standstill and compelled to surrender.
The situation, however, soon righted itself because the depositor
had no safe place to keep his gold and soon returned it to the bank
he had been distrusting. We had not at that time that ingenious
device known as the safe deposit vault by which banks and trust
companies now connive at their own decimation.
The Civil War was marked by no less than four banking and
currency crises, in i860 and 1861 when the war broke out, and in
I^ )3 and 1864 when the unwonted demand by the government
and the creation of a new currency, threw the machine out of
gear. To remedy these derangements the most useful and effec­
tive device ever known in our finances was created. I mean the
loan certificate of the New York Clearing House. It was in­
voked four times during the war. In i860 we issued $7,357,000;
in 1861, $22,585,000; in 1863, $11,4 71,00 0 and in 1864, $17,725,000
in all about $58,000,000, which was an immense sum for those days,
They played an important part in the war for the Union. While
the banks and the people were subscribing for bonds with an
uncalculating patriotism, the clearing house stepped in with the
loan certificate and steadied the business situation by enlarging
credit and preventing the panics that always follow excesses of
any kind in the commercial world. The effect of the loan certifi­
cate is instantaneous. Credit is expanded upon the soundest basis
known to experienced financiers and the sufficiency of that basis
and the volume of the supply is regulated by bankers and men
of business whose character and antecedents are the strongest
guarantees of the honest and wise administration of the trust.
You are all familiar with the basis of the loan certificate,
yet a short re-statement may nut be amiss. Every bank in the
clearing house has the privilege of coming to the loan committee
with its bonds, loans and commercial paper and obtaining seventyfive per cent of their value in loan certificates of all denominations
with which they can pay their debts to each other. They naturally
bring their very best assets, so that in our experience in New York
not a single dollar of loss has ever followed our many issues.
Again, quite naturally, the banks are desirous of getting back their
gilt-edged assets, and the process of redemption and retirement
begins almost as soon as that of issue. The practical part of
this expansion is very interesting. The loan committee can issue
many millions in a single morning. There is no necessity of
waiting for a slow Dress to nrint
•— XT. _




a audit ic-aiaiciucm may not ue amiss.

livery bank in the
clearing house has the privilege of coming to the loan committee
with its bonds, loans and commercial paper and obtaining seventyfive per cent of their value in loan certificates of all denominations
with which they can pay their debts to each other. They naturally
bring their very best assets, so that in our experience in New York
not a single dollar of loss has ever followed our many issues.
Again, quite naturally, the banks are desirous of getting back their
gilt-edged assets, and the process of redemption and retirement
begins almost as soon as that of issue. The practical part of
this expansion is very interesting. The loan committee can issue
many millions in a single morning. There is no necessity of
waiting for a slow press to print the circulation. We, in New
York, make them in denominations of $5,000, $10,000, $20,000,
$50,000 and $100,000. We have not yet come to $5 and $10 , but
the present crisis has shown the need and desirability of such
small notes.
After the war there ensued a season of speculation and de­
velopment, stimulated and fostered by the currency created for
the needs of the government and the people during the rebellion.
This lasted till 1873, when the inevitable reaction came, resulting
in that famous panic. Here the clearing house hesitated a day
or two before issuing certificates, and a hesitation even of that
time is a very serious matter. When a house is on fire you do
not want to walk your horses before the engine. In 1873 we issued
$22,400,000, and the time between their first issue and their final
retirement was about four months. Then for eleven years there
was no occasion for their use, until the Marine and Metropolitan
Bank panic in 1884, when about $25,000,000 were put out and
again four months was the limit of their existence.
In 1890 we felt the effects of the Baring panic and issued
sixteen millions, and in three months they were all retired. You
remember that in England in the Baring panic the joint-stock
banks, under the guidance of the Bank of England, substantially
adopted our loan-certificate system for their own relief. In 1893
the certificate performed its most useful and brilliant service. We
had a crisis of great and varying elements. The silver question
and the end of a long period of commercial extravagances con­
spired to produce an emergency that none of us will ever forget.
The New York Clearing House acted with superb energy and
promptness. We issued more ,than ever before, $41,500,000 certi­
ficates were signed. Their issue began June 2 1, 1893, and the
last one was cancelled November 1, 1893— again a period of about
four months. In 1895, when the Venezuelan message was issued,
the clearing house forstalled and prevented a panic by authorizing
the usual issue, but the very promptness of their action prevented
the use of any of them by the banks.

1

>




i - Mil ! .S
m i

p< » r u >x 1 > m i n < >r h i \\ i :s i IX n i l . P R E S E N T
m
iFIN AN • IAI. CRISTS

B y A. L . M i i i .s .
Pro !i!» m I r-t National Ha ik, •' t tl-nul. Ore

Hie stor

> the pani gf 1907 \ arics
f

from th: of foi nu 1

panic-. I . howcv r wt profit by its less > ainl >volve from its
ti>
troubles prupi ) 11’ .metal lcgis'..tion that in future will protect our
banks and on mm. :o al it;*-.-. • .ns aj. ainsi danger and less, the panic
of 1^11- will not have been without compensation. \s was the
ca.se in 18%" tlii- countr in 1007 was seemin'. ,!y most prosperous.
1 here v\a-> uch railroad construct! n. involving tlu* sinking of a
great amount
capital far lx v nd vital was im. ■ .li.i'ely prodmlive. . speculatu-n v\as rife. accompanied by much t-v•ravagance in
both public and j rl\ ate iit\ . gl ..ft in m-huti si 'o.-n" - n ethod .
were exposed; mono wa* in increasing <!«•" md at si add', rising
ra.es ; there v><re m: ny strikes and
•
mands; rcai estate was active and there was a rcc'less expansion
)f all credit.
These conditions are the familiar forerunners ei cv • _ panic,
hut our people paid no he •• I to tin warnings mm.ial !•; -undents
I ■; tnee, s] oke jestingly f “ a prosperi
ncl
on
tilure of
tckei
Company in New Y. a plunged tin cot.miy' intc a u--,.-- ...me.
As. m 1857. the failure of the ( lino I ite and 'I'm 1 Companv ot
Cincinnati: as. in 1873. the failure of lay <\.ok< & Co : a . in 180,v
the failure ot the Fim.u.lelpiu. t and lb -ding
»dr. , t . pam and
the National Cordage Company, so, in i</~. the failure > f the
>
Knickerbocker Trust Compare 1 , \e ! the .ml f->r some years to
follow of our • • UtCrv’s reckless fina u ' o pii.U 'lis
.
The bankers of the Pacific X • ? ' e -t were not altogether un­
prepared for financial ' 1 oil d i-i Pi E. <; - l-.adi n .id th hand
o
writing on tin wall and were want...
1 appi -a;hi.. „ danger.
•
\nd
yet. when the stoic broke, they were n.>l prep m l. P r they found
themselves stripped 0! tlieir !•'.,»
siei n ha earn s and forced 1 > depend
upon the actual coin within their vault . Confidence begat Ivy the
knowledge that the X rthwest was out « 1 lin.mcia' bondage t-•
>
the East, that th. who!,. vorld v a calling, h»r us lumber. 1b.1t
an immense wheat crop had just been -u. , - fully ha - c -ted, .vhich
England was eager to buy at highly ,-enamelalive prices, was de­
stroyed in a second, and fur a momcn th: peoplt of the X. rth
west could see' nothing bef -re them but disaster.
Prior to <fetober ..’8,tli the Facil e X ulhuest had \v. tche l with
interest, but with no concern, " l i e ri« h man's pari, in W all
Street," had noted the struggi. of th. Copper \iug>, the failure
of the Knickerbocker Trust Company and the gre. t run on the
Trust Company of America. The troublesin New York were
interesting, but did nut closely con era the X rrhwe.st. Hut on
October 28th all was changed. Telegrams p.-ured into Portland
from bank c > re-p, .ndents all over the country, < mum hip mi
1
coin or currency against yoin balance
Make your drafts payable
mil' through the clearing houseMl vise you organize f.-r your
own protection.'
The financial machinery > the I nitcel States
t
had broken down and in a Hash business was paralyzed.
Tlu Portland hanker.- then carried in their vaults but the usual
amount of c in timr-- p for the ordinary transaction of business.
W hen tins - bo., can;'-, 1 > .
i,, they had bar'-•! v begun i . shift
th'-ir balance \\. stwapl, uhvay-s nt >- i v at erop-m< ving time
I*ace to ijce vvi'h die prob'c - 01
in mg thirtv millions of bushels
<’f wheat, threatened l.\ frighten,.! and by-ten aal depositors, with
no funds other than those then in their vaults, tlu \ s u Jit .-id from
b ni^fjge J :'!f
I ' i' ll'-rim u o n
as; ' th
■ t.ci v .H
i
tiiuud. w ith tip e' upti. n •»1 -hree oa
ft ,1 ( 1< !'., r »«yli nulil
>
December P-'b
1 )n th< la mi date Portland returned t..,normal
conditions, the first of all the larger cities to m i n t ' all restrictions
on payments.
The return was >o• >iuphshed without tr< uhh * >r
excitement: tlu people had had tin t to < > down ml the good
1
sense and loyalty of o n r citizens did tin rest, lint though there
was a legal lv liday from (). tuber joth n December pith, the batiks
of the -'t.it* kept ..pen
ihe hohda uav- j.r* t<* ti* i» to tile hankf

sit uni ion and cu ' Vfober 2<ath rt«**nn i ;i U-gai hoibl.i that con
tinned. with tb*- exception < i three «m ; >, fr-m < k:toB<r
>
until
December ibdi. < )n tin Inner date P o r tl an d re lumed to norma!
conditions, the first <>i all the lav. - r eiti< > t« remove all restrictions
• »
on pavmcnts. Th e return was ace-.mplishtd xvi’hout t rouble-^or
excitement; du people had had t i n t to cool down and the
>* l
<<
sense and 11 »\ :111x of onr citizens did th< rest. Hut though there
v as a legal h lidax from ()< toher 2<ith
*
December i<>th, the hanks
•»f the state kept ‘pen. T he holiday ::n v p r o t e c t i o n to the hanks
against hy-c.-ricl dcni-i tors, [rmrrnt* ! attachments being levied
on the state hanl.s and made possible the restriction d payments
I lie morn nt a holiday v. 's eeured the Portland hanks, on
October Joih, authorized the issuance o ’ clearing' house eerlifi
cates tor use between tli<- banks in --ettiing balances. < >ne million
dollars in certificates were i-mrd, but In Pee*•mher iMh d x Inm
dred and thirty thousand dollars had be n retired. The most
difficult problem to face was to finance and move tin wheat crop.
I here was not enough eoin in die banks and some sort of a eirculat
ing medium to serve as an emergency • ern-nex had to be devise ;
and one that the people would take.
Printing-presses ware sol to work maruifa'luring what was
known popularly a- "Wdieat Money.” The banks agreed to take
it on deposit or for payment* of debts. This w. * m cos arx to give
tlu- scrip negotiability. This emergency currency was in denot.u
nations of 3 ' no, $2.00, 35.00, S;o.< •<>, and 3.1000, and in all nvri
a million dollars were placed in circulation. I11 1 lie main it was
secured by w heat in warehr<u- os, covered b\ insurance, and for
every dollar of money so issued there was in the warehouses $ 1 . 5 0
of wheat
Some small amount was issued also against approved
bonds in the same ratio
The currency was readily taken in ill
the stores and by the railroads, and yet ii was lik'd by no one.
Letter secured even than national hank notes. sin< 1 Is bind national
bank notes ultimately is »ml\ the las raising power - 1 the I ’uili -1
States, nevertheless Portland's .heal mono , kicking the powet
of legal lender drifted quickly ba< k into the bank . Such in brief
is the story of the panic from the view point of the Pacific North
west. What of its lessons?
T o him who was in the control and management of a national
bank in Oregon in the fall of 100“ tw< dangerous faulty in om
exivling financial laxvs were strikingly apparent, to wit. the .utter
weaknes of tin lielitious system of hank reserves, and the total
inadequacy of our present linatie .il system to with land the on
slaugln of unreasoning panic.

Fictitious h’csci >cs
In .111 address delivered before the Washington Slate i ’ a11!:«.• rv
Association held at W hatcom, July _rp i<;o.p the writer, in -pea! ing
of bank reserve-, said as follow-,
‘Thu ler the pre-enl National i ’. ank Ai l , in oilier than n erxal itrea hank is permitted to loan all hitt 1 ^ per cent of it liabilities;
of this 15 pci cent three fifth - may he deposited in a rcscrvi city ;
and the bank, of a reserve city are permitted to depool one half
of their 25 per • cut n erve in Neyv \hark <'liicago or St. Louis,
wl u i e the national banks are required to keep but
pei cent in
o>iii. Mas ii ever occurred to you bow nai l an amount of eoin
i- thus behind the deposits of tin country
fl ow dependent all
the batiks of the country are Upon lln resource- o f the great hank:,
of New York, ( l i i cago and St I a m i s ’ The restrictions of the

. M

l




*

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««l




3— M IL L S — A N N A L S .
lishment of a central bank several points must be covered:—
1. The government must have a voice, and perhaps a con­
trolling one, in its management.
2. No one section of the country should be permitted to domi­
nate in the directorate, all parts of the country should be repre­
sented.
3* The bank should be a bank of issue and not of deposit. Its
profits should be derived from leading its circulation and its debtors
should be the banks of the country.
4. To it alone should be given the power to issue an emergency
currency, and care should be exercised in the amount of gold
reserve.
The national bank currency and greenbacks should be retired.
If the central bank cannot be established and we have to work
with the tools we have on hand, which is more than likely since
changes come slowly, then to the national banks should be given
additional powers. They should be permitted to take out an
emergency currency to the extent of 50 per cent of their capital
on comparatively easy terms. This currency should be a legal
tender and in all forms like the present notes. It could be pro­
tected by a small tax on all the national banks as well as bv deposit
of securities. Above all and before all it must be taxed on a
rising rate that will make sure its retirement when the emergency
passes. Panics come quickly and do not last long, so that the
emergency currency should be promptly issued and as promptly
retired.
The panic of 1907 has passed into history; whether its lessons
will have taught us aught of good or will bring about reform in our
financial system remains to be seen.

. o f* .

(L A h A ru J, X

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*

c L t - u jf c

)

, A 6 7 . 1 ,7 ,

Fort S u tter n a tio n a l Bank, "acromento, CaiiX^waieT^
/

As you are
ut ,tfie
^ tch ro

er a trcrepa

^

V vO s QJu O, T L
L lT
O rto h o F 10 ^ l Q 1 1 ♦ ^

‘4

ig in fo
o j/ V h e
'o n ( r ^ a

our [ /i me

I t has always seemed to me a great m istake fo r the Uhited S ta te s Govern­
ment to exclu d e from n a tio n a l hanks a l l b u sin ess o ffe red by such p erso n s, as the
making o f a loan o f th at kind o fte n means the estab lish m en t o f a good account
and o b ta in in g the in flu e n c e of the borrower 'toward secu rin g other good accounts
fo r the bank,
F resen t co n d itio n s are a grea t detrim ent to the banks o f th e
n a tio n a l a s s o c ia t io n , because th e banks organized under the S ta te law not only
have th e p r iv ile g e o f lo a n in g money on real e s t a t e , but a lso have p r a c t ic a lly
a l l the p r iv ile g e ^ th a t n a tio n a l banks have except the is s u in g o f c ir c u la t io n ,
which g iv e s them a tremendous advantage in an a g r ic u ltu r a l d i s t r i c t , or in a s e c ­
tio n where a grea t deal o f th e b e st s e c u r it ie s are in the shape o f real p rop erty.
T h is, o f co u rse , as you know i s th e c o n d itio n in a la r g e p ortion o f the United
S ta te s .
In n$r o p in io n , n a tio n a l banks should have the p r iv ile g e o f o rg a n izin g sa v ­
in g s departments to be m aintained in th e same banking room, i f the bank so de­
s ir e s .
The funds and accounts of the savin gs department to bo kept e n t ir e ly
sep arate from th o se o f the commercial departm ent, but I do not th in k th at i t would
be n ecessa ry to o f f i c i a l l y apportion part o f the c a p it a l, surplus and undivided
p r o f it s to the savings departm ent, as u s u a lly th ese funds b elon g to the sto c k ­
h o ld e r s, excep t in case o f fin a n c ia l tr o u b le and, in such c a s e , would be a v a i l ­
able p ro p o rtio n a tely fo r th e b e n e fit o f th e d ep o sito rs under th e lav;.



Savings departments o f n a tio n a l banks should be required to in corp orate in to
t h e ir by-law s r u le s and re g u la tio n s such as ob tain in most o f the savings banks
in regard to time n o tic e s o f withdrawal o f funds, but the savin gs departm ents, of
such banks, should have the option o f paying on demand.
n a tio n a l bank savin gs departments should not be r e s t r ic t e d to loans o f only
r£i£t3r-(50K p er cen ty o f the cash v a lu e , or market v a lu e , o f the p rop erty, as in
many s t a t e s the lim it is c iYty-^SO^Kper c e n t, and th ere is no reason why th e S ta te
banks^should have th a t advantage and s4-3ety^60^per cen t/' le a v e s an ample margin
i f the bank o f f i c i a l s are honest and, i f they are n o t, no r e s t r ic t io n would a v a i l .
n a tio n a l banks should not be perm itted to lean on r e a l e s ta t e except from funds
o f a re g u la r ly organized savings department nor be p erm itted to loan more than s i y per c e n t / o f t h e ir savings d e p o sits on re a l e s t a t e .
Every n a tio n a l bank

P

.-o .e L e a d

16717

15

savin gs department should be required to have not l e s s than f i f t een ftIT/] per c e n t /
o f i t s d e p o sits in v ested in United S t a t e s , S ta te , pmmty or Jt^micipal bonds, which
would serve as a secondary r e se r v e .
The cash resei/ve o f n a tio n a l bank savin gs
departments should be s i x / fc
c e n t /, a t le a s t tha*e^~ {S 'fp e r cent to be k ert
in i t s own v a u lt , the balance to be k ert w ith th e commercial department o f th e bank,
drawing in t e r e s t a t not l e s s than
per c e n t.




V

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7 6 7 1 7

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— nptl~ inr 27. i ^ n ,
'
v

Answering your c ir c u la r to n a tio n a l banks hr.vinp eavincs depart mantu
I hf vc enswerod sane "yes" and "no" as req u ired , but I would lik o to r i vo'
yo’U our exp erience in regard to the savin gs department in our bank, which
you may use or r e j e c t as circu m st;n ces im pel,

cjr
>
> rl2

In the f i r s t p la c e , n a tio n a l banks in commercial c i t i e s do not ncou the
savin gs department', but those in a g r ic u ltu r a l communities end savings bank
towns, a b so lu te ly need such departments to meet the com petition o. other ba
ana to hold th e ir customers and p r e s t i g e .

,

t i o r f l o f y

I ,T1 4 S »bartk 4 s iifia davy
p u y |c '
't

c o n fe r ^
\vpulp y th fe v

A fter rte 1
yfc gathered iu th e
J “ / f ^ ej yeaj^, whipfS j i s . *'
u
J f t onefc: f t pv6 r , rjfit
fp o s its , to r e ta in sane.
c o n r e titio :/, to fytrj in te r e st]
As* i t A
v;as anl; r A so n a b le t& exact some c
^
b a t /^ p V & d ^ o si^ D r^ , ------^ **
I&

iii

/ o i s j A

e l t y 'i o n

h

f

tfcce f i r wi^hdr.wals <ix 1




f

in mrMe of s t r e s s .

tog eth er
ccruing^

\ J t hayel a lw a y s m ^ l e d A t h e fu n d s
/■ 0
tqfd 9 cinje w^th: n x'/je i n t one

T< y
i

yvnrof;ghIfig t#c
on our

y/te ha^ro never f o ^ d any/Ui
pi cy^d jv;i,<aouV npoditfg ‘r e a l efc ‘
Unjjced t a t a W call do they€am ^
m e lt, r
/
•'
v

_ _ _ _ _ _ / ‘ unds
our f

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^

Ay/Qn -A

)

f^ny! bay# ih
p a t ^ o f /the
'
__
apfc ik
r
prefr^nt o p p o rtu n ities or in v e s t -

7he unusual f a c i l i t i e s o ffered banks everywhere to buy commercial paper
have grown to such an ex ten t th at any sm all bank could keep a l l o f i t s funcs
in th at l i n o , i f they considered i t good judgment, furtherm ore, correspondents
o f country hanks w i l l g e n e r a lly supply them w ith such lo a n s, during t h e ir f lu s
season i f they ask for them; a l s o , the investm ent in bonds, a th muiucip,-. ,
r a ilr o a d , in d u s t r ia l, and o th erw ise, keep p r e tty c lo se pace w ith the amount o f
d en o sits in the whole country; th en , th ere i s always a c e r ta in amount of lo c a l
commercial demand ir. ever:: town ir r e s p e c tiv e o f s i z e .
With th ese o p p o rtu n ities of in v e s tin g , w thout p la c in g the. d opesi t o r s ’

r e a l e s t a t e mortgage loans* (which ore
■^ilc*i must be pepaAA on demand , on
money*
v slow rnd u n certain in th e ir c o l l e c t for lon ger p e r io d s, and absolute^
t
uEuall
* banks adding r e a l e s ta t e mortgage
t i c n ) , there i s no n e c e s s it y for n a tio n a l
loans to t h e ir l i s t o f in vestm en ts.
knowledge t ’ at no nercentage of n a tio n a l bank d e p o sits
should be perm itted to be loaned in th^t
tak ing whatever
T

-Tirrr

in

n v

™ .T r £ T r l S r . *

o f f e r , cod * * * * * * * . h i . lo c lo d o . . r„„l . . . . . .

s e c u r ity .
io n a l banks oper te on the p r in c ip le ygaWtl?6
14liave ho dp^fbt tl&nt a^jl
c cldenV ito make ^ •o fit ,«n tha^Susk'-O BM
[k t l in s i s t e n c e to as
stion i ^ l f n d s in ihoprhr^
nett to JordQ Ahem. ---- j - . lr/ com nalEpjpjr0 1
. feA t the h eceo txLni t i m e s ./c o n se q u e n tly , y j f &/ I n r-,1 r ^ C w ^ o r .
t h o ip n n , h o s . u s u a l l y
i
i; e : i.
* ■- *
Jr
JuHti fro . th.w ir j r 9ix^ fcf tawvhg if3^uri t ^ ^ i jr**
ss/lirs to bq AursSft^to pr'cvowt l s s , ma- •• ' s
TpSc.'f*d t h f t t t r .t f who^Tbho, b u s i e s
n H
l v n stn to
* r e d 1 pfen8_ &l •e the \ j h r - time holdinrr- o€

Real e s t a t e Wans <
39*1 be d ivid ed iy^to many^classe
o f c^ujjteej/v/ould bp on b u sin e ss flo c k s' th at ha,
t/heyr Vntorbst promptly: /the next ml^ht he
o i l s^ Z /n d /these $ro su b ject to .the own
#
njjor^st; Another c la s s is loans on r 0 s^ fe^ ces^ /fw h i^ r^ re; b /th gdod/and
qi ng Vo the f inane ip 1 - ab i ty^ a^ ^ io/ov; j$&#f^Snot her jpdass i i ytn sn
p ro p erty , wlV^ch are/V ery bK
<i
drfy ban’:; and another c l as i s on Indusl a l p la n t s , which are a ls o bad fo r a bank.
oor
^ 7ho do

0 ffC^ 7

1 7

I was in the mortgage lo a n in g b u sin ess fo r twenty f iv e years b efore I cane
t h is bank, and I know t hath the tim es o f p ro sp erity in th e rea l e s t a t e b u s iare follow ed by tim es of/ex^reme d u lln e s s .a n d during such p eriod s o f o x d u lln e s s , ire a l ostato/^raluep u s u a lly JM fR follow the ajaartlft.^WPjiwd on mort­
is on th e p r o p e r tie s . T his would
ding such
s . to./nave / department o f r,c/a re.
bai/k to/tfe ably to meet demands i o f cajtfT tj^t
u a .ljf' g r e r t o r 'in
tim es \
c ^ t i m e s of de£rqssi/on, th e
novy
of/ d ep ro ssio n ,/ Furthermore, I /mov^Clu t ^ ”
foney on the Anortgage loans
fh io t 'b e
t h e b o r r o w e r }d n o r f c a n t h e
U a n i them selves be so ld nor
as go< c o l l a t e r a l i n t h e e v e n t t h e / t a n k n e e d ThesG s t a t e m e n t s e r e f a f c t s ^ ^ a t h a v y
ed the moneyy /T h ese are not
g -n e n ts.
ce i n t h e r e a l e s t a t e b u s i n e s s sin ce^/x h e
( > proved by reg u lar recur
n
t^on o f the U n ited S t a t e s , afid t h e ^ r a r e j u s t a s - p o t e n t f o r t h e ftc± ± srrw x ra f u t u r e
rs the"* have been for the j^ast.
The savings department o f a n a tio n a l bank i s sta r te d fo r th e purpose o f
drawing trade in to the bank i t s e l f , and th e r e fo r e , should be conducted in the
same counting room as the balance o f the bank.
I f i t should be re u ired to be
separate the advantages of i t would be l o s t to the bank.
The sep a ra tio n o f the unds and sep arate investm ent would only have an advan
tago in event th at laws were made p reven tin g the withdrawal o f the d e p o sits in t x

tim es o f s t r e s s , and p erm ittin g the bank to carry a sm aller l e g n rasorvu m
th a t depart...ent.
I t appears to me th at the fa c to r o f s a fe ty would re o u ire th e
in c r e a sin g o f le g a l reserve rath er than the d im in ish in g o f i t .
IT aturnlly, on
a r is in g market, a sm aller reserv e might be carried than on a f a l l i n g m arket.
But no bank cm change i t s investm ents s u f f i c i e n t l y rapid to meet such changes o f
requirem ent.




went th r

ma ]A1
07

A

a in ly

term matur-

I t would be r e g r e tta b le i f the n a tio n a l government made any changes regard­
ing savin gs departments in n a tio n a l banks more than a cla u se s p e c ify in g that
’’mono"- could bo receiv ed on co n tra ct as to n o tic e o f v i th c r ^ v a l•

frwrnrffHMS/ ~U
S SECD3tt,
.~




Q

I would aak that t h is roport ho made a port o f the minutes,
and I w ill go over i t , i f you d e s ire .
Mr. Weeks.

Perhaps I ought not to ask th is question,

i f i t is not proper to answer i t .
i f the Commission

I would lik e to know

,

was su b sta n tia lly Tmanimous in i t s r e ­

port.
Mr. Cox.

I understand i t was.

Mr. Hamilton.
Mr. Cox.

They were unanimous.

I was not present.

I was sick at the time;

but the position that the Commission took v/as e x actly what
I thought it should take; and I had le t t e r ^ from Hr. Hep­
burn, who was the chairman, asking m to go to Chicago to
e
appear fo r him in the m atter.
Mr. T alb ert, Mr. Forgan and

I have also heard from
r . Wardrop-— a l l members of

the Commission.
Hr. McKinney.
Mr. Cox.

You have a number of these rep o rts0

I have a few of these copies.

Mr. McKinney,

'Stai have enough of them so that you

could give a copy to each member of the committee0
Hr. Cox.
of these.

I

a h a lf dozen.

I w ill see that a l l the gentlemen get copies
only had a few, and I brought a l l I hadf —
I think I gave you a copy.

Mr. McKinney.

You gave m a copy; yes s i r .
e

The Chairman.

The stenographer w ill include^this

report of the Currency Commission of the American Hankers•
A sso ciatio n , made at the meeting held at Chicago Saturday
January 18 , 19 0 8 ,/in the report of the proceedings, in con­
nection with Mr. Cox’ s remarks, i f there i s no objection
on the part of any member of the Committee.
3




jr XK
j\\>
' \>

4

The report above referred to is as fo llo w s:

, \jyU

(S

Ck-

Y/V.^OW* 5 '
-C

Xtyj^M 4 -

" r' •

Kt/U.




r
i

Mr. Cox.

Mr. Chairman, I would ask that you hear

Mr. Hamilton, who has been one of the pioneers in cred it
currency, and who has been before you on other occasions;
and who was form erly the president of The American Hankers'
A sso ciatio n .

STATEMENT OF JOHN 1 . HAMILTON, ESQ.,
of Hoopeston, I l l i n o i s .
The Acting Chairman.

Please sta te '/here your home

i s , Mr. Hamilton.
Mr. Hamilton.

Hoopeston, I l l i n o i s .

The Acting Chairman.

lh at position did you hold in

connection with the American Bankers' A ssociation?
Mr. Hamilton.

You mean at the present time?

The Acting Chairman.
Mr. Hamilton.

No; what p ositio n did you hold?

I was fin'mexly- president of the Asso­

cia tio n / two years ago.
The Acting Chairman.
Mr. Hamilton.

For what years?

For the years 19 0 5-19 0 6 .

The Acting Chairman.

Are you now a member of that

Association?
Mr. Hamilton.

Yes s i r ; I an a member of the A ssocia­

tio n , and a member of the Currency Commission, and Executive
Committee.
The Acting Chairman.

And as a member of the Currency

Commission that reported favorably upon a b i l l at a meet­
ing held at Chicago, I l l i n o i s , January 1 8 , 1908, you are
now appearing before us?
Mr. Ham ilton.

Yes s i r .




(o

2
The Acting Chairman.

Proceed in your own way, to .

Hamilton.
Mr. Hamilton.

The Commission met in Chicago

pursu­

ant to the c a l l of the chairman and took up the two p rin ­
t

f

cip a l measures that were before Congress, as we understood
at that time.

'

There were several others, of course, that-

a g ^ before Congr e ss^/but the two that wex’e a ttra c tin g the
g re a te st atten tion were the Aldrich "bill and the h i l l pro­
posed hy your Chairman, Congressman Fowler.

A fte r

d is ­

a

cussion of these measures fo r the greater part of the
day a committee was appointed which prepared the resolution s
that you have before you.
The Acting Chairman,

One question, p lease.

Were

v

there many hankers present at that meeting?
Mr. Hamilton.

Ton-o f-th e committee w»r . - prosent—

at the meeting* ■ ■ j en of the fift e e n members of th is commit­
tee were present!
The Acting Chairman.
pan amp data
'!

Can you, from memory,

rm

iaam
m

name those men^ or have you any data from

which you can name them, and t e l l from what sedtions of the
country they came?
t o . Hamilton.
one of them.

Yes s i r ; I think I can name every

Mr. James B. Forgan, President of the ^ ir s t

National Bank of Chicago, was chairman of the meeting, in
the absence of to . Hepburn, who had gone to Europe; but
Mr. Hepburn gave out a le t t e r outlining h is objections to
—''%
Ui t1

these measures, #tr-±k was p r a c t ic a lly the same as the reftA^ ^ f n ^ C

—

port; Joseph T. Alb ert^,^President of The Commercial Nation­
a l Bank of Chicago; Mr. Charles H. Huddick, President of




1

i
J

fc j

I

ll

_ o-^ X./t'U

1 Tl* - l O r H j j

i^ C K n ^ l

f ,7V

?he Third National Bank at S t . Louis; Mr, Myron T. H errick

A

*

Chairman of the Board of D irectors of the Society fo r
0

4

« r,-

Savings ol Cleveland, and J$x-Governor there; Mr. Wardrop,
t

'M ax (pjur^Ah H ^ tu r v ^ J

f}

yyO Pittsburg^ «
f
:E-have foi^oMum wH»r ii«
u—
^ V v woo

^

[Vpvvo'K

M Arthur
r.
/ V ''0

Reynolds, of Des Moines, (Dowa; Mr. -C
harin g &» Waxier -of
,T

JO

p

f-

rt , ~ /^ oc-7' \
^

9

a

_

(AL
V^

— - o f the Whitney National Bank of Hew Orleans^-

Mr. Hayes.

And Mr. Perrin?

Mr. Hamilton.

Mr. ^errin was not present.

He was

^Teht Mrlian to^ncime tho^ev^who

The Acting Chairman.
^

o n ly

wanted to show on the record the character

of the nen who were present, and the sections of the country
represented.
Mr. Hamilton.

I w ill say in th is connection that

Mr. Perrin and Mr. Wade, who were both members of the
Committee v/ere not present, yet they have since endorsed
the action of the Committee; as have also Mr. Cox, Mr.
McCord, and Mr. Swinney.
not present.

They are the fiv e who were

There were s ix who were not present, count­

ing the chairman, Mr. Hepburn.

W had in addition, at
e

tnab meeting, Mr. Lacey, president of ^he Bankers National
Bank of Chicago; George M. Rejnxolds, president of the
Continental National Bank, and Mr. Roberts, president of
The Commercial National Bank.

They were present and took

FA

part in the discussion of th is measure, and while they are
not recorded in connection with th is, yet they were of the
same opinion as the committee.
Mr. G ille s p ie .
Mr* Hamilton.

How long were you in session?
We v/ere in session all day Saturday,

rc
.




f

4

from about nine of clock in the morning u n til about s ix
or seven o’ clock at n igh t.
Now, the committee f e U

that th is is the best measure

that has been so f a r before the American people.

This

measure has been presented, as you perhaps know, to a great
%

many sta te organizations and a great many d iffe re n t organ­
iz a tio n s, as w ell as to the membership of the American
hankers* A sso ciatio n .

I t has the approval of the\hankers*

A ssociation of I l l i n o i s , ^ f - i t s Executive Council, and has
the approval of The American hankers *. A sso ciatio n ,

^hat is

th is b i l l H
totacia was brought before the convention held at
A tla n tic C it y f ---Hr. G ille s p ie .
Mr. Hamilton.

Last summer?
Last sinnraer^-^iM /he secre tary sent

out n otices to a l l the members of the asso cia tio n that one
day would be set apart fo r the disdussion of th is measure,
givin g a l l those who had any objections to present^ an
opportunity to be there and present th eir o b jectio n s.

The

notice was not only sent to members of the A sso ciatio n , but
to bankers who were not members, so that anyone might have
an opioortunity to be there.

I t is true th at the measure

was gotten up between the meetings of the A sso ciatio n , and
we deemed i t advisable as a commission to present i t to
that organization and secure ttiTtr approval.

There were

but two men who appeared upon the fl&or of the convention
in opposition of the measure.

They were given f u l l l i b e r ­

ty to ta lk as long as they chose and as much as they chose
on the su b ject.

A fte r lis te n in g to those gentlemen and

the arguments in favor of the measure which were mainly pre
sented by the Chairman, Mr. bowler, but one other member of




5

the Commission, Mr. P errin , taking part in i t , they were
adopted.

You may have noticed a c r itic is m in the newspapers,

claiming that there were a lim ited number present at the
meeting.

There were about one hundred and f i f t y bankers

present in the room when the vote was taken, and twelve
of those voted against the adoption of th is measure.
ever, the notice had been sent out and a l l bankers
$

How­
had

been given an opportunity to be there and to vote against
it i f they were in terested in it#
Mr. G illesp ie#

What is the ,membership of the Asso­

ciatio n that attended the meeting at A tla n tic City?

What

was the la rg e st attendance on agf one day?
Mr# Hamilton#

The attendance that morning was per­

haps the la rg e st we have had.

I should judge there must

have been in the neighborhood of two thousand present at
the morning meeting, and th is was taken lip at that meeting#
Mr. G ille s p ie .

And one hundred and f i f t y were pre­

sent when th is matter was acted on?
Mr. Hamilton.

Yes; they had d rifte d out.

Mr# McCreary.

But they were on notice that th is was

to be taken up?
Mr. Hamilton#

That day was set apart fo r i t .

It

was the sp ecial order, and nothing else was set fo r that
day.

There were some other matters considered---amend-

ments to the co n stitu tio n , e t c .,- - b u t th is was the only
thing on the program published by the Association fo r that
day, fo r th e ir consideration.
Mr. G ille s p ie .

You have seen the a r t i

phlet that has been sent around by Mr. FraAme?

the pam­
'




/D
6

Mr. Hamilton.

Yes s i r .

Mr. G ille s p ie .

With h is speech, givin g a r e c it a l

o? the proceedings of the convention’
’
4 U
Mr. Hamilton. -A-speech published by Mr. Frame and
sent broadcast throughout the country was not

delivered

in the convention.
Mr. McCreary.

I t was

canned goods’

I t was a speech

that he did not d e liv e r , but had leave to p rin t?
Mr. Hamilton.
Mr. James.

Yes.

He did not d e liv e r that speech.

Do you think i f he had delivered i t

that i t would have a ffe cte d the proceedings any?
"Vwt A

Mr. Hamilton.

Hone what-yyer.

Mr. G ille s p ie .
Mr. Hamilton.

I do not think so.

Did lie speak?
He spoke in a general way, and apolo­

gized fo r taking up the time of the convention, although he
had unlimited time at his d isp o sa l.

Mr. Frame made

chal3.enges against members of the Commission in h is printed
speech, that he did not make in the meeting.

The ch allen ­

ges would have been answered had he done so; but fo r some
unknown reason or other, the speech was i)ermitted to be
printed as though he had delivered i t .

The fa c t is that

that speech has never been d elivered in f u l l , at any meet­
ing.
Mr. Weeks.

Is i t printed at the expense of the Asso­

cia tio n , or at h is own expense?
Mr. Hamilton.

I think i t is

Largely at his own ex­

pense, although i t i s a part of the proceedings of The Amer­
ican Bankers1 A ssociation , in th eir published rep ort.
Mr. G ille s p ie .
Mr. Hamilton.

Is he a member of the Association?
Oh, yes^ he is a member.

His bank




n
/

is a member of the A sso ciatio n .
Mr. McCreary.
Mr. Hamilton.
Now,

Is he a member of the Commission?
He is not a member of the Commission.

g o i n g

back to the b i l l , we hare been very much d is ­

appointed as atcomraittee, that the b i l l -h^d-no- - h
t

in tro ­

duced e a r lie r in Congress, supposing, of course, that it
would be.

This b i l l has back of i t the support of three-

fourths of the n ation al banks outside of the reserve c i t i e s ,
and i t has the endorsement, I think, of the m ajority of the
(j

banks in the reserve c i t i e s , ^ p a r tic u la r ly , as to the banks
outside of the reserve cities,ihliiB2tartalaja fo r the reason that
I took th is matter up in d iv id u a lly with those in s titu tio n s .
The more we c o n s id e r^ the measure the b e tte r we think it
is fo r the in te re st of the country.

W b elieve i t w ill
e

give to the country a safe currency, one that w ill be auto­
m atic, one that w ill meet with the demands of the times,
and be the means of preventing, to a large extent,
panics.

a

W re a liz e that no measure w ill absolu tely do
e

th is, no matter how i t is framed, no matter who gets i t
up.

This b i l l provides---do you want m to go into the
e
general provisions of the b i l l , a l l the way through?
The Acting Chairman.

Yes.
z

Mr. Pujo.

That is the McKhney h i l l ?
*

Mr. Hamilton.

Yes.

Mr. Pujo.

Yes, I would lik e to have you do so.

Mr. James.

You need not, of course, re fe r to the

tech n ical d e t a ils .
Ik# Acting Chairman.

State it in your own way.




Mr. Hamilton.

This b i l l , under section 1 , provides

that a national bank, before i t can issue such notes
must have been in business a year and w ist have a surplus
equal to twenty percent of i t s c a p ita l.
that

A/f

I t also provides

must have out a c ircu la tio n equivalent to s ix t y -

two and one-half percent of theTK c a p ita l, and a ft e r so do­
ing may issue cred it notes equal to fo rty percent of the
bondjj^secured circ u la tio n outstanding. -They* may then issu e -+ t
Mr. McKinney.

Explain why you took that sixty-tw o

and one-half percent as the b a s is .
Mr. Hamilton.

The sixty-tw o and one-half percent

b a s is , as was explained la s t year in connectioh with th is
measure, was arrived at

being the ava ilab le bonds held

by national banks that might be used fo r bond-secured c ircu ­
lation," and i t w s done not only to protect, the national
banks who are a d d e rs of these se c u ritie s ^ but to protect
the in dividual holders of the s e c u r itie s .

The

Govern­

ment having established the precedent, in the o rig in a l
enactment of tn is b i l l of furnishing a market fo r i t s se­
c u r itie s , and the people having fa ith in th is c la ss of se­
c u ritie s as to the note issu e, we did not think i t was
advisable to depart e n tire ly from that precedent.

It

also assures a future market fo r the Government s e c u r itie s .
(At th is point an informal disuttision took place as
to where in the b i l l the provision as to sixty-tw o and
one percent was to be found.)
Mr. McKinney.

I w ill say that I introduced the

id e n tica l text that was sent to me.
not c le a r enough to express the

I f that provision i s
iuuhm meaning o f the
m

«l< tl nii il i




/J

9

Commission, that can very e a s ily be changed.
•

i

»

As I under-

stand, the d esire of the Commission w
s^p to preserve the
/A*

present character of_bcnd^secured

notes, and to keep i t

up bo that amount, and not to change from a bond secured
circu la tio n e n tir e ly ,
Mr, H alditon.

Yes.

The Acting Chairman.
Mr, Hamilton.

Proceed, Mr, Hamilton,

The b i l l provides fu rth er that a fte r

these notes may be issued, they may issue an additional
twelve and one-half percent in cre d it notes bearing a tax
of fiv e percent.
Mr, James.

This f i r s t issue bears a tax of two and

one-half percent?
Mr. Hamilton.

The f i r s t issu e bears a tax of two

and one-half percent.

Section

2

the two <ind one-h a lf percent ta x .

of the b i l l provides for
Your Committee amended

that la s t year and made i t three per cant.

W went
e

back

to the o rig in a l idea and made i t two-and o n e-h alf, b elievin g
in the theory hew that a low tax was b etter than a high
ta x .
Mr. James.

As I understand i t , under th is b i l l ,

you require thorn bo deposit fiv e percent reserve to redeem
these notes issued o r ig in a lly , in gold.
Mr. Kanilton.
Mr. James.

Yes s i r ; in the guaranty fund.

You make the f i r s t tax two and one-half

percent, and you ihafe keep that tax in the fund u n til i t
becomes fiv e percent,

and then you le t the banks withdraw

the f i v e par cent in gold’
Mr. Ham ilton.

Yes.

N
\




10

Mr. Jam©s.
accumulated ^

But what becomes of the tax which has
the fiv e percent, which has enabled the

banks to withdraw the o rig in a l tax, when a bank d esires
to liq u id ate or to quit business?
Mr. Hamilton.

That, I presume, would remain in

the hands o f the United States Treasury.
Mr* James.

But i t is in the hands of the Treasury now

as a tru st fund.

Is there any provision in the b i l l that

i t sh a ll be covered into the treasury?
Mr. Hamilton.
Mr. James.

No; there is no provision of that kind.
Do you think i t ought to go into the

treasury?
Mr. Hamilton.

I r e a lly think there should be a lim it

to the amount of the guaranty fund established in some
manner; but in the measure there is no lim it .
an open question.

I t is l e f t

You have your annual tax from year to

year, and that accumulates—
-Mr. James.

I t accumulates up— fiv e p e rce n t--to,

Mr. McKinney.
Mr. James.

The tax keeps on.
When i t gets over the fiv e percent, what

becomes of it ?
Mr. Hamilton.
Mr# McKinney.

There is no provision for th at.
I t keeps p ilin g up.

I t does not go

back to the banks, and i t is not lim ited to the fiv e per­
cent.
Mr. Hamilton.

W have not undertaken to dispose of
e

that surplus.
#

Mr. Weeks.

As long as you are speaking of the tax

on th is currency, I would lik e to ask two or three questions




/r

11
about i t , in a general way.
Mr. Hamilton.
Mr. Weeks.

Yes s i r .
bo you not think we have currency enough

in ordinary times, say f o r t y - f iv e weeks out of the year,
under present conditions?
Mr. Hamilton.
Mr. Weeks.

Yes, I do.
Well, do yem think under th is method of

taxing the currency that i t would a l l of it ever be re­
tired ?

ould not some of i t be in circ u la tio n a l l the

time?
Mr. Hamilton.

I think there is bound to be some

of i t C ircu latio n ,

and I think i t good p o lic y that i t

should ha in c irc u la tio n .
Mr. Weeks.

Then it is adding to the volume of our

present circ u la tio n a l l the time, to a certain extent.
Mr. Hamilton.

I do not think that tho amount would

be m aterial.
Mr. Weeks.

Why would i t not be

Mr. Hamilton.

material^

I t depends on your redemption f a c i l ­

itie s .
Kr. Weeks.

Why would it not be m aterial, i f the

banks can make a p r o fit out of it ?
Mr. Hamilton.

The a b i l i t y of the banks to make a

p ro fit depends upon the length of time the notes w ill re ­
main in c irc u la tio n , of course.
Mr. Weeks.
Mr. Hamilton.

Of course.
And we do not b e lie ve that these notes

can remain in circu la tio n for a longer period than th ir ty
days, under tho most favorable circumstances.

Consequently




the p r o fits ' would "be

30

meagre that the notes would natur­

a l l y "be r e tir e d .
«
Mr. Weeks.

The same notes w ill not remain longer

than t h ir t y days, hut some other notes/will go rig h t out
to take th e ir place, w i l l

not’
and H ‘ may not ; because when

Mr. Hamilton.

the tide of i,trrj.eni» of currency is toward the commercial
cen ters, i t is p r a c t ic a lly impossible to keep out any con­
sid erab le quantity of these notes.

There are certain

seasons of the year when the money accumulates in the
commercial centers, — the actu al b i l l s .
Mr. Weeks.

Let us take an instance.

notes and they come into Mr. Cox's bank,

You issu e
^here is a p r o fit

in issu in g the notes and Mr. Cox sends yours in fo r r e ­
demption, and issu es h is own, doss he not’
Mr. Hamilton.
M Weeks.
rX.

C e rta in ly .
Is not that going to be perpetual, that

method of keeping the' notes out as long an there is any
p ro fit in doing it*

£

that although a note may be, and

w ill be on an average, re tir e d in t h ir t y days, does i t not
mean that the same volume of notes is going to be out a l l
the time, provided there is a p ro fit in issuing them?
Mr. Hamilton.

Mo, i t does not mean that^ fo r the

reason that i t would be impossible fo r Mr. Cox, residing
in a commercial center, to keep out any considerable quan­
t i t y of those notes.

They would he immediately sent back

to thorn fo r redemption^ and i f he should put out f i f t y thou­
sand d o lla rs in notes, tomorrow, or to -d ay, in the
Washington, he i s p r a c t ic a lly sure

c it y of

to fin d those in the




13
Clearing House tomorrow morning fo r redemption, the same
as he fin d s the d ra fts issued on the in stitu tio n there
4

fo r redemption^, or c s h ie r 's checks
Mr. James.

~uppOge i t was in a country lik e I repre­

sent, where we have no clearing house; where we have a
national hank in , say, one town, and two in another, and
money i s worth s ix or eight percent.

Would i t not he

p ro fita b le fo r the hanks to issue this, at two and one-half
percent, i f they can lend it, at s ix percent, and keep i t
out?

When people in my country get money, they do

rush to put it in hank.
to a certain exten t.
would lend the

not

They keep i t in th e ir pockets,
fcho&e-banks,where t

money at s ix and even at eight pereent-/VV)

in Kentucky, in my d i s t r i c t , would not that money stay
out?
Mr. Hamilton.

I do not think that money w ill stay

o ut to any considerable extent in any l o c a l i t y .

The whole

p rin cip le , I think, that the banking system of the United
S ta tes is based on, i s the ehefikipig system rather than on
the note issu in g system.
Mr. James.
Mr. Hamilton.

That i s true in the great c i t i e s .
W are encouraging the people from
e

the country---- you and I are both from tho country-—
Hr. James.
Mr. Hamilton.

But that is not true in the country.
But we are encouraging the people

to build up the deposits.

That is what they are aiming

fo r .
Mr. James.
Mr. Hamilton.

A ll the time; yes.
Your bulks, no matter what kind they

may be, n atio n al, s ta te , p riv a te , or whatnot, are encourag-




It

14
ing the people to deposit th e ir money in the banks and to
use th e ir in dividual checks in preference to currency.
Mr. James.

But, rig h t there, th is panic has done
A

more to discourage that than anything on earth, and you
jbj-

w ill fin d that i t w ill take years to get people back to
the standard of confidence that they had before the panic,
in depositing th e ir money.
Mr. Hamilton.

There is no question cibout th at.

You are ab so lu tely rig h t in that proposition, that th is
panic has been one of the most disastrous to the banking
in te rest that ever occurred, and i t has shaken the co n fiden ce of the public in those in s titu tio n s .
Now, i f th is measure had been enacted a year ago, i t
would have prevented the occurrence of th is panic to a great
extent.

The condition in your section of the country was

the same as the condition with me.

I am the only member

of our Commission who does not resid e in a clearin g hotise
center.
brought

The re su lt o f th is panic; and the trouble i t
upon us was that we could not get actu al currency

from the commercial cen ters.

In iome l o c a l i t i e s the de­

mand fo r currency was hbused by the country bankers.
Mr. Weeks.

Do you not think i t was ge n e ra lly abused?

Mr. Hamilton.
Mr. Weeks.

I do not think i t was gen erally abused.
Does not the statement

o S

the national

-baakwsp prove that?
Mr. Hayes.

I think i t does.

Mr. James.

Was i t not abused, not so much by the

country bankers as by the fe llo w who had the country bankers'
money on deposit?
ManaamH— ithihifaniiiin




'
f
15

Mr. Hamilton.

Thero ara two s id e . to that question.

W who l iv e in the country are in clin ed to condemn our c i t y
e
brother.

Of course, the c i t y banker had h is d i f f i c u l t i e s

to contend with, and I think when you s i f t both sides o f the
question down,

they/\ Both in d iscreet in th e ir action s in

alarmed w
idria. the fe a r that they could not get money from
the in s titu tio n s ,’ and in every community where the hanks
had to pay a lim ited -amount of cash to th eir customers
those communities have been se rio u sly crippled hy the
B-wfr conditions that have p revailed , and confidence has
been disturbed in those communities.

How, going hack

to the idea of the country hank note remaining out longer
than the note of the commercial center.

I t might perhaps

remain out a l i t t l e longer, hut i f these notes are sent in.

*

[as is contemplated hy the Commission hut not emboc
the report^ through the Post O ffice Departm ent/bj» any
tut ion,/ for cred it without e x p e n s e to the h a n k r e ­
m itting, i t w ill immediately send those notes home fo r re ­
tirement! and * thought m yself, p^T^rrmail^, that i t might
he a wise provision to have that expense borne hy the hank
of issu e .

That would he an extra inducement to the hanks

who are Uot in the national si^stera, sanding in these notes
fo r redemption.
Mr. James.
Take my home f*,ow
n»

The reason I asked that question was th is .
There the hank suspended specie pay­

ment, and only paid ten percent on a
over s ix t y days.

m a^s d e p o sit,fo r

I t i s a tobacco community.

They coram
enciecA,

buying tobacco, and when they paid th e ir money out to the




16

farmers, th<3 farmers would not put that money in hank.

They

ware alarmed, and they took the money home with them.

Now,

i f they were s a t is fie d with th is currency, would they not
do that same thing?
Mr. Hamilton.

I f they did

take th is kind of curren­

cy home i t would not hurt, fo r i t would only sta y a lim ited
time beforo it would get back in the natural channels of
business, the 3ame as has occurred under the present co nd itio n s .
Mr. Hayes.

In other words, they would spend i t .

Mr. Hamilton.
Mr. James.

Yes.
But you must not presume on the theory

th at the farmers have to spend a l l they g e t.
/jK ^

Mr.Hamilton.

I t is not an in fla tio n as long as -fee*

keop»js ' hidden.
My. G ille s p ie .

The point is that there is a p r o fit to
C- 1
T

the hank as long as
Mr. Weeks*

keepfc it in h is pocket.

What I wanted to ask yO u fu rther was

whether in your judgment i t is desirable for hanks to make
any considerable p r o fit on the issuing of c irc u la tio n .
Mr. Hamilton.

I do not think i t is desirable that

they should make any considerable p r o fit ; no s i r .

-ut I

think there should be some p r o fit in i t .
Mr. Weeks.

I do not think that any man with any

reason would contend that there should not be a p ro fit in
axV business en terprise; but c ircu la tio n i s fco intim ately
associated with everything in our business
necessary.

l i f e that i t is

The bank is supposed to make i t s p r o fit out

of i t s commercial business, or the business of loaning




•

l\

17

money, which is i t s business.

Bo you not think that the

p r o fit in issu in g circ u la tio n should be reduced to the
minimum?
Mr. James.

E sp e c ia lly an emergency c ir c u la tio n .

Mr. Weeks.

I w ill confine i t to th a t.

Mr. Hamilton.

Yes, I think it should be, and I

think i t is reduced to the minimum in th is measure.
Mr. Weeks.

I think the present c irc u la tio n is r e ­

duced to the minimum.

I agree with you; but do you think

i t is in th is b i l l ?
Mr. Hamilton.

I think so*, yes s i r .

Now, take th is

b i l l , the o rig in a l b i l l that was presented by your committee
with -A three percent tax, with money loaning at seven percent.
I have had i t figured by the actuary of the Com ptroller's
o ffic e , and by other men, and i t shows a net p r o fit to the
bank, providing that such notes remain out on an average
of t h i r t y days, the same as itehm
psh they do in Canada, of
1#95 percent.
Mr. Weeks#
Mr# Hamilton#

Do you not think that is too much?
I do not think i t is too mucji> be­

cause I do not think that they w ill be able to maintain
the f u l l amount in c irc u la tio n for t h ir t y days#
Mr# Weeks#

tiim BnttntiDM em
hm
lm

s ix t y days, instead of th ir ty days.
p fo fit ?

Suppose i t remained out
What would be the

Do you know?

Mr# Hamilton#

I do not know#

Of course, i t would

be greater#
Mr# Weeks#

What I wanted (to esjje c ia llj^ get your

dp inion on was whether you think i t d esirab le to have more




19
currency than we have now fo r normal times, and whether
you think i t is d esirab le that banks

should make any

considerable p ro fit out of c irc u la tio n .

You know, of

course, that there is a very wide spread prejudice againnt
anybody making any money in th is country ju s t now.
Mr. Hamilton.
Mr. Weeks.

C e rta in ly .
E s p e c ia lly the banks.

Mr. Hamilton.
Mr. Weeks.

Yes.
And i t seems to m that there is a point
e

my prejudices are not, against the hanks, as you
know---- I p

M

r f A A d A d & lr if

where we can properly draw

the lin e in le g is la t io n .

The business of the bank^ is

to loan money, and to make i t s p r o fits out of loaning
money, and when you make money out of a p r iv ile g e which
i

comes from tho Government,

and which a f fe c t s a l l the peo­

ple whether they are borrowers of money or not, i t seems to
me that should be reduced to a minimum; that that is rood
p o licy and good business from the standpoint of the Govern­
ment^

that reason I think, m yself, that the tax on

the circu la tio n is too sm all, and I wanted your d e fin ite
ideas on that su b ject, because you have had large exper­
ience*
Mr. G ille s p ie .
tio n to i t s customers.

The bank stands to furnish accomoda­
These credit notes do not repre­

sent the c a p ita l of the bank.

They only put the bank in

the same position to use these notes as otherwise they
could use th e ir deposit p r iv ile g e s .

To tax ltodas^note

stands upon no other plane than to tax the rig h t of the
deposit p r iv ile g e s .

'Hiesa notes can be used and put into




13
19

c irc u la tio n , but as long as they are in the t e l l e r 's
drawer, in the hank's possession, they represent nothing
hut a signed piece of paper.

They become nothing u n til

they no out in c ir c u la tio n .

The hank stands to furnish

th is accomodation to commerce etrw to -say that-when-dr^
t—
■f t i v e a
$

1

1

1

itrr— a s t
e

oner

t h

t

A

e

^ j ^ h

som e

*i p t ‘, u a r e * whothe r _ ,

a b l j g a f io -n y—

to draw a check

- w e — h -o -

take one-o- these.
f

’

notoe-;—i'' yi

'".mm -t.hlmr in both—
enqeq«*—
add to re ­

quire a hank to pay a tax when i t putsjouf one of m these
fi
.

I

cre d it notes is on no d iffe re n t plane whatever from re­
quiring the hank to pay a fax whenever i f opens up a deposit
account v/ith a customer.
Mr. Weeks.

I should he p e r fe c tly w illin g to argue that

point with fly frien d from Texas at the proper time.
Mr. G ille s p ie .
aM j-

And every cent of tax that you put

kA

on tirbr hank* is going to recover, in se lf-d e fe n c e .
going to put i f on commerce^,

I t is

no other country that

issues th is kind of cred it ever put a tax upon i t , except
in Canada where they put a 3mall tax on to create a guar­
anty fund.
Mr. Weeks.
e n tir e ly .

I am gettin g at i t from another viewpoint

In ray judgment we have ample currency for

ordinary needs, and any further issu e of currency means a
tendency to in fla tio n .
e ith e r.

I do not use that term te c h n ic a lly ,

I want to he sure that we are not going to have

any fu rth er issue of currency as a permanent issu e.

I

want i t to ho temporary, and for that reason I want the
ta x large enough to immediately and suddenly drive that
currency in .

That has nothing to do with the te ch n ica l




20

question which Mr. G ille s p ie has raise d , and in which I
think he is probably r ig h t; and i f we did not have h a lf
a dozen other kinds of c irc u la tio n I would agree with him
ab so lu tely.

"But having the other circu la tio n we must

fig u re from that standpoint, and not from the standpoint
that we would figu re from i f we were sta rtin g to e n tire ly
revolu tio n ize our currency system.

That is what I am

tryin g to get a t.
Mr. Crawford.
you not?

You want an ordinary in crease, do

W started about ten years ago with twenty-two
e

d o lla rs, and now we have th irty-tw o d o lla r s .
Mr. Weeks.

I understand, but we have c irc u la tio n

enough, in my judgaent.
Mr, Crawford.

~’ut what about the increase

in b u si­

ness and population?
Hr. Weeks.

The c irc u la tio n has nothing whatever

to do with the business, in ordinary times.
Mr. Crawford.

bo you not think the increase of c i r ­

culation since 1896 has had something to do with the b u si­
ness p rosp erity of the country?
Mr. Hayes.
time.

You gentlemen arc taking up Mr. Hamilton*8

I want to hear him, i f you w ill excuse me.
Mr. Powers.

ence to t h is .

I want to ask a few questions in r e fe r ­
I was one of the republican members who re ­

fused to report your b i l l la s t year, fo r the reason that I
believed i t w$s very la rg e ly an in fla tio n measure, based
i

su b sta n tia lly upon the views that were advanced by the
gentleman from Massachussets, Mr. Weeks.

I see no s u f f i ­

cient reason to b elieve that t h is would be a fle x ib le




21

currency, that i t would coins back a fte r i t had been put out.
Knowing that the conditions are not the same here as they
are in Candda, that we have more money in the United Htntjea
state hanks than we

have in these, I want to ask yoh, i f

these h i l l s are equally good with any of them, land they
must he or there is no use in putting them out) what reason
would any sta te hank, tru st company, or savings hank, have
fo r se le ctin g them out and sending them fo r redemption in ­
stead of continuing to pay them over th e ir counter1 i f they
^
have no h i l l s of th e ir own to get out?
Mr. Hamilton.

They would have no p a rtic u la r in te rest

in returning those b i l l s unless there

some gnaa bibcnl nr.
m

provision made fo r th e ir return, eith er through the plan
0

utlined hy the Com ptroller’ s o f f ic e , or else embodied in

the measure.
Mr. Powers.

Would they not continue, as long as they

were good, to use them and pay them out, and would they
attempt to return one of these any quicker than they would
a national hank note, secured hy bond?
Mr. Hamilton.

/o
✓C

I t wa^ contemplated,

hub

you know,

th at that part of the d e ta il sh a ll he covered hy the Comp|9

t r o l l e r of the Currency in the ru les that he makes govern­
ing these redemption centers.
Mr. Powers.
Mr, Hamilton.

I understand-—
And there is a provision hero that

provides that such expenses may he paid out of th is fund,
you know.
Mr. Powers.

"But what inducement SA there fo r a tru st

company having an amount of money consistin g p a r tly of
V

•

bond secured currency and p a rtly of th is currency, to se le ct




22
these h i l l s and send them to a reserve center to be re ­
deemed, as lon^ as one is equally as good as the other,
and one goes as current as the other?
Mr. Hamilton.

I t depends, of course, upon the loca­

tio n of the In s titu tio n , la r g e ly .
Mr. Powerw.
Mr. Hamilton.

But one is ju s t as good as the other.
I f it is in the country, the country

in s titu tio n s,would send those b i l l s to th eir correspondnnti
fo r cre d it, because they can send them without the expense.
.

Mr. Powers.

Why should a tru st company do i t , or

why should any bank do i t , unless i t wants to g t i t s own
b i l l s out.?
Mr. Hamilton.

The reason they should do i t is that
n \jtW
vy\iL

i t is natural fo r -Aayesis in any lin e of business to a v a il
themselves of any p r o fit they can make.

I t is also to

th e ir in te rest to keep down the c irc u la tio n as much as
p o ssib le.
Mr. Powers.

Perhaps you may not r e c a ll i t , but I

asked su b sta n tia lly th is same question of Secretary Shaw,
as to what he believed with reference to the b i l l s returning
within a reasonable time, and he said he did not think over
ten percent would; and I concurred with him— u n til i t got
worn out.

How, le t m ask you one more question.
e

Can

you not in some way r e c a ll those b i l l s so that instead of
th is being an in fla tio n measure that would increase the Vol­
um of currency-— I agree with Mr. Weeks that we do not
e
want i t increased in ordinary times---%SiA/t&*^ i t can be
issued as emergency currency, and then returned to the banks?
I lik e your b i l l in raatoy re sp ects.




Of course a measure of that kind

Mr. Hamilton

might be amended, fix in g the date to which the note
should remain out*, hut I do not think i t advisable to
do so.
How do you

Mr. Powers.

p r o p o s e

to have the hank

cA t\ e/'r f

s

By depositing

redeem the note0
*

t o , Hamilton.

notes?

In lawful money, or circ u la tio n

notes.
Mr. Powers.

I suppose you would permit them to he re­

deemed hy depositing law fu l money.
Mr. Hamilton.
Mr. Powers.

Yes*
I care not how large the tax i s , i t w ill

not a ffe c t the c irc u la tio n unless you impound the law ful
money and keep i t hy i t s e l f , not to he paid out u n til the
h i l l s come in .

A tax w il l not reduce the c irc u la tio n

under the e x istin g law s, w ill it ?
Mr. Hamilton.

What you mean i s , i f the money is de­

posited with the Treasury Department, and he, again deposits
i t with some ot ar in stitu tio n ?
Mr. Powers.

Ho matter i f the bank has been re lieved

o f the in te r e s t, the excessive currency or in fla tio n is
s t i l l out,
Mr. Hamilton.

That i s a feature that we have not

a tte s te d to re g u la te , because i t applies to tha management
/

of the Treasury Department.

W did not think i t advisable
e

to embody any featu re o f that kind in th is measure.
Mr. Powers.

How, ycm said that i f t h i s had heen

adopted la s t year i t would have prevented the present panic.
I rather think i t would, hut having once issued se ve ral




24

hundred m illions more th is year, how would i t have heen
next year?

Would we not have had i t worse than th is year,

i f i t should prove to he an in fla tio n rather than an e la s­
t i c currency?
Mr. Hamilton.
Mr. Powers.

I do not think i t can he an in fla tio n .
I cannot see how i t is p o ssib ly anything

e ls e .
Mr. Hamilton.
the Commission

Because the hanking experience of

s h o r n

that the money accumulates there

durigg certain p -riods of the y e ar.

The national hank

notes to-day accumulate there and they do not know what to
do with them.
Mr. Powers.
Mr. Hamilton.

I understand th a t.
These notes are hound to go in ju s t the

same as tlio oth«-ga^ the national hank notes^ go in.
Mr. Powers.

I admit that a certain percentage w ill
y\rt\

get in,

hut £h**3^ w i l l not send these in ±7—

n

getting the in terest^^m o st i n s t i tutions^wl U

preference to
not^/vr and

the amount of currency that i s sent in w ill not he very
large as compared with the great volume of currency of the
country.

I cannot see any reason why you ca£ assume that

these notes, i f they are equally v a lid , and i f the people
receive them equally r e a d iliy as any other put in c irc u ­
la tio n under our pecilliar hanking system in th is country,
sh all come hack, except very slow ly.

How long does i t

take fo r national hank notes to come hack---two or thre e
years, on an average! does i t not?
Mr. Hamilton.

Seven hundred and t h ir t y days, I "be­

lie v e is claimed to "be the period.

\




25

Mr. Powers.

I cannot see how they can come hack

f

—,

ra p id ly , or hut very l i t t l e more rap id ly than the present
currency.

I f th at is so, then th is becomes, thereby,

not an e la s t ic currency, but an in fla tio n
we do not want;

k n d

c u rre n c y

f which

that has been my objection to your

b ill.
The Acting Chairman.

Would i t not be well fo r us to

hear Hr. Hamilton through, because our tijjie i s running.
I do not think Mr. Weeks1 questions have been answered,
have they?
Mr. Weeks.

I think he has answered a l l he cares to .

The Acting Chairman.

Co on with the other section s

of the b i l l , then, Mr. Hamilton.
Mr.

amilton.

Section three of th is measure provides
ould not be

fo r the fiv e percent tax which]
^

i

'

issued u n til a fte r the other two and one-half perc.nt, notes
had baen in c irc u la tio n , as is n atiiral.
of the hank note issu e, as provided in

The to ta l amount
th is measure ,

sh a ll not exceed the c a p ita l of t?ie in s titu tio n .

There

has been a great deal of c r itic is m of th is p a r tic u la r sec­
tio n of the b i l l , in d iffe re n t sections of the country.
having out
National hanks iam nm liani th e ir f u l l quota, have o b ject­
ram lBm
ed to th atprovision, claiming that th is measure would not
g ive them any r e l i e f , because they cannot issue any addi­
tio n a l c irc u la tio n .

However, I think that that is a very

important provision in th is measure, that

th re should be

a lim it to the amount of notes that may be isnued.

And we

have provided in the la s t section of the measure so that
national banks having outtaa the f u l l quota of issue may




reduce i t dovm to
r e f e r -nice to th

6

2

* l/ 2

f !

of th e ir c a p ita l

ithout

law that row e x is ts | lim itin g the amount of

redemptions to nine m illio n d o lla rs a month.
Section 5 of tho measure provides fo r the le g a l reserve to
he carried as again st these notes, req u irin g tlie seme reserve
that i „ now carried against deposits in the d iffe re n t kinds
of hanking in s titu tio n s , as designated under cur national
hanking avit.

In other words, providing the same requirements

as to the reserve in the cen tral reserve c i t i e s , that t ventyfiv e per cen t, he carries

in th e ir v a u lts} and the same provisinn

as to reserve c i t i e s , requirin g tliat they rm~st maintain a
reserve c v tw en ty-five per cent,,, one- h a l f of which nay
Lhe carried

ith a cen tral reserve o ity j and the s no provision
A

as to the country banks, which require fif t e e n per cant.
re. o:?V9, t h r e e -fift h s of which may he carried w ith re servo
c iti :

or cen tral reserve c i t i e s .

H r, " r
eeks:

uo you not think i t advisable to increase

tho amount of the reserve which country hanks should carry
in th e ir own v a u lts?
Mr, H aailton:
serious mist ho.

I do not,

I think tha

r
ould he a

I believe tliat tho average country hank

carrie;. aigreatar reserve most of I.he time than tho law con­
templates they should carry, and i f you would increase the
dtw M . *

reserve that, they should carry to tw o-thirds instead of two-.
• i f fJStSjytouwfculd

be tying up one hundred

nd ten m illion s

of additional money in the hands of the country in stitu tio n s
that would he ab so lu tely u seless in the ordinary tim es,
Mr, James:

jn times of panic h;.vc they not got that

tie d up anyhow, in reserve and cen tral reserve c it ie s ?

2

31

V




M •, Ilaviiiton:
c i L i e , to

They h a v ' that

up In cen tral reserve

certain extent, y e s; but a fte r a few days of the

•

t

experience that v/e have jur.t had, the greatest d i f f i c u l t y
• e a l l h a ’ to contend with was that ,:o did ?aot have enough
cre d its in th. reserve c it ie s rath er than e.on^hk^aah#
Mr . 1’u jo:

I would lik e to ask ?T . It '.nil ton a question,
r

fiie author Izeci circ u la tio n th

X

c o u l d he taken out by national

banks in tldLs eour.try approximates nine hundred ni 1 1 ion
dollcii' i,

’ oos i t not?

Mr. 1lard 1 1 on:
Mr. *?ujo:

Yb o , s i r .

And the a ctu a l c ircu la tio n of bank notes

PproxiruvUu* s ix hundred m illion d o lla rs , does i t not?
M . Hamilton:
Mr. Hayes:

Y es.

Moarly seven hundred mi 1 1 ion.

Mr. IT'n ilto n :
M illio n .

The la s t report r 3 s ix hundred and one
'

Mx. T'ujo:

During the fin a n c ia l aanic of 19 0 7,

it h a

duty of ona -h a lf of cue per cent, every s ix months on c ir c u la ­
tio n , would not three hundred m illio n d o lla rs of ad ditional
circu la tio n to the volune of currency during tho la s t panic
h ve prevented th is fin a n c ia l panic?
Mr# Hamilton.
Mr. Dujo :

I think so.

Did not tho clearin g house c e r t ific a t e s issued

chrring tho la s t panic amount to only $150,000,000^ approxin .to*
iy ?

Mr. Kamilton:

I have never seen tho fig u re s on th a t.

I think Her York
Mr. Pujo:

I an re fe rrin g to the report of tho Comptroller

o f the Currency, at page s ix t y ,

showing that c le a r in g




3

3^

house s e r t ii icatd s wore issued, amounting to $ 1 :’ 4 , 000,000*
I I

• # Hamilton:
:•

7/tc. Puj o:

I have nem r seen that re p o rt.

Did thesissuonco of then ) olo r i n g house

cerv.if Lcaios have ?- tendency to prevent rune on hanks,

nd

to p re le c t t h ' fin a n c ia l In te re sts of the country, generally?
K '. I ls iilt c n :

I think tlv1 tsmiiny of ’die cle a rin g house

c e r t ifio a t 's vas in ocicollont movement to stop the panic,
but X do no t he 1 1 eve the is rinsing of the cle a rin g house
Q e r t!fic a te c 9 or *he thought that clearin g house c e r t if ic a t e s
a:% l i v e l y to bo is s u s l, would he the means of preventing a
o
p an ic.
Mr. ~ujo:

Could not the national hanks in th is country,
#

by taking out the circ u la tio n authorized by law, have prevented
the occurrence of th is panic in 1907?
L v . Km i l l ton:

C e rta in ly , s i r ; there was p len ty of

margin in i t , I think.
r v , Puj o:

Could they not, a fte r th

appearance of the

pan ic, have prevented i t by an ap p licatio n fo r the issuance
o f

the ourr

oncy to which the banks vrro e n title d under the

lavr?
Hr. " .a r i lton:

The g re a te st d i f f i c u l t y was that they could

not get the bonds to put up, to secure the bond secured
c irc u la tio n .
t

7 1’ . T jo :
’u

ju i t not fu rth er a fa e t that, there 3 s; not
sm

out'f:io i.n t p r o fit in the circu la tio n fo r then, according to
th e ir viewpoint, v/hioli has prevented then in the pa,.it from
taking out the c irc u la tio n to which they were e n title d under
\
the law?
Mr. Hamilton:

Under your present national bark
CO
k

system of depositing Gove rment bonds fo«x se c u rity fo r




4

33

c ir c u la tio n , there lo

n o

inducement f o r a n ation a

to issue these; notes fo r the sak-*. c f p r o f i t ; the reason .
being that the higher the ra ts of in te re st that p re v a ils in
tha oojinmtty, the lo ss p r o fit there is in national bank
note c irc u la tio n .

In other words, at an eight per cent,

b a sis they top I t be lo sin g money.
7 * T j c : ’ in obtaining t he Issuance of a clo nr in— houoje
"i
o rtlfio a V e to bo used by a baric, is not se c u rity rac[Cfined?
" ,

’ a lilto n :

K , puio:

Yes, s ir *

"Dhes tlio se c re ta ry

Treasury require

ad d itio n al or d i f f e r shi se c u rity from v/hat the cle a rin g house
V,:uing e 1 " eulation?

of ITr ■ tro.vl requires
If.-1 Haniltcfi;
« = -\
*

, I m ink - why, c e rta in ly he does,

^

X

j n -s^ .. T

1'

1Tv # ?u jo :
^u:>'Stlonf

in

,

n -o r X n - i I n r r X -

7hon your v.1ewf upon a study of th is

that tho hanks could not have prevented th is

p oilo I)**cause they o id not have the bonds to obtain the
additiomS. c i ven ial ion to which they ar 1 en titled under the
la •
d •?
"

Hm.ilton:

They do not carry them, and do not have

th:ja; y e s.

(A fter
r.i,, tool,

a

(/^r—

U

discu ssion , the C o m ltteo, at IP. o’ clock

rccoss u n til

2

o’ clock p.ia.)




After re c e ss.

ST AT ^r^rr
Mr * IPr. i l l on:

c v :

Mr . Chai

n a ~

>
r.. i*a: xi,toy , ■170 r
i think

7

- Continued?

!

when wo took th ' rc oo s a , r o l a i v o to tho lo g a l re
carried against the cre d it notes to he Issued.
Tho Ghoi v ■’an :

i t:hirk veu had f in i she ’ that

F - . Hr Id t on •

i t is conterrolat '•»! i n conn n c t

th is tho t the same roue eve nay ho

v n e *

note in cane of ono rgen cy that

now used to

i i

deposit, an against the d e p o sits.

in the :1 s i y
c
.j1 / e
*
*

in oth ?r words9 when

there were heavy rith&rrrraln of

you would have a

la rg e r le g a l r e s e r v n
|on hand that night ho used to so cure
thAoo r o le s . o.r 1 cred it notes would ho put out in lie u of tho
wi t! idr ' ’"in < dono rj 1 1 3 .
;

/

Section 5 of th is h i l l provides

o r

the creation of a

guaranty fund frcrdrtex to ho held hy the Treasury.
Mr. G ille s p ie :

you s t i l l provide, I see, in the other

sectio n , that they continue to hoop th eir reserve on deposit
with other hants in reserve and cen tral reserve c i t i e s .
Mr. Hw Alton:

TT make no change in the
o
—

.

>

resent law
■

r e la tiv e to deposits (whr.tove:
(3 V

Mr. G ille s p ie :

I helicvo i t is your o inion that

no change should he .vic.de?
/

#

•

11*. Hm i.lt on:

T do nfct think i t advisable to si:Jco a

change in th^.t cam .
Mr, w»-»fcs:

i f you increase tho recount of tho reserve

vhi oh tho com t r y harlca should 3co p, do you think you would
ho .lu stifio d in reducing th

amount of tho res ?rTo which

tho control hordes should he oaipellod to Jee p, in the same
proporti on, or in s In ila r proportion?




G

v . . a -illc a p ic :
K r .I C ffltfltc u :

3ay
V e il,

e.

fla t

tw e n ty

f r a n k l y , I T /iU

V -T

v 'n t .

a ll

around.

s a y t.h >.t I h a r e n e v o r

driven t h a t s u b j e c t a n y t h o u g h t , an". I d o n o t k now how i t

*>uld

As t o t h e l o c k i n g up o f t h e r e R < v v e m on ey o f t h e
c o u n tr y ,

th a t

h;/

in

c o u e th lr .G t h a t w o u lo h - v -

o u t.
•Tr. ' h

An:

I o o u ll n e t t e l l ,
"’h a t do y o u t h i n k

to h e d e m o n str a te d

i n an o f f h a n d a n s w e r .

th e e f f e c t w o u ld h e i f

• o p e l l ” 4 t h e c o u n t r y te u ttn t o k e e p t o n p e r c e n t , i n
j
v a u lts ,

if

a m o u n te d

th e

in c r e a s e

o f f o u r p e r c a n t . , w h ic h i t

to on e h u n d r e d ’. m i l l i o n s , a n l y o u s t a t e d

you

th e ir
w o u ld h o ,

t h i s m o r n in g ?

§

M r. K a a i l t o n :
id . l o c k s :

One h u n d r e d an d t e n m i l l i o n s *
.'a ll,

s o m e t h in g o f t h a t s o r t ; a n d r e d u c i n g

t h e am ou n t t o h e k e p t h y t h e

c e n tr a l r e s e r v e hanks f i v e

- i* f r * * ^ r r r r v r n r t X

ce n t.

to th e

sam e am ount o f m o n ey .

p er




3(p

What do y o u t h i n k t h e e f f e c t v /o u ld h o on t h e c o u n t r y ,
on t h e b a n k in g i n t e r e s t s ?
H r. H a m ilt o n :
w h a te v e r ,
b e fo r e ;

H ave y o u t h o u g h

I h a v e n o t g iv e n t h a t

b e c a u se th e

it

sh ow t h a t

an i n c r e a s e d

r ,u b jc c t a n y t h o u g h t

i s n ot d e s ir a b le to

r e s e r v e o f th e co u n tr y bank.
c o n d itio n s

o f th a t?

q u e s tio n h a s n e v e r a r is e n

but I th in k th a t

it

is

and

i n my ih in d
ch an ge th e

I do n o t t h i n k t h e r e c e n t

n ecessa ry th a t

t h e r e s h o u ld b e

r e s e r v e e x a o t e d o f th e m , h e l d b y t h e

in s ti­

tu tio n s .
H r. M cK in n ey:
aw ay dorm a t t h a t

Down i n my l o c a l i t y
c r i t i c a l tim e .

Mr* G i l l e s p i e :

You m e a n -in t h e

Mr. M cK in n ey:
w ay,

a p p a r e n tly ,

th e r e s e r v e s w ere

c o u n t r y b a n k s?

Of th e c o u n tr y b a n k s.

T h e r e w as no

i n w h ic h t h e y c o u l d b e s t r e n g t h e n e d .

T h ey

c o u ld n o t g e t c u r r e n c y .
Mr. M oM orran:

I s not

th a t th e b e s t rea so n

i n t h e v /o r ld

why t h e c o u n t r y b a n k s s h o u ld r e q u i r e a l a r g e r r e s e r v e

in s te a d

o f a s m a lle r r e s e r v e ?
Mr. M cK in n ey:

I a lw a y s t h o u g h t t h a t

d id n o t h a v e a p ro p er r e s e r v e
th e ir

ow n.

it

if

a c o u n tr y bank

w as th r o u g h c a r e l e s s n e s s o f

A p a n i c n e v e r ju m p s on y o u w i t h o u t a m i n u t e ' s

n o tic e .
Mr.
th is

G ille s p io :

O f c o u r s e t h e y h ad p l e n t y o f s i g n s o f

c o m in g o n .
Mr. M oM orran:

Our b a n k s n e v e r a l l o w t h e m s e l v e s t o

b e lo w t w e n t y p e r c e n t .

get

T h ey g i v e a s a r e a s o n f o r t h a t t h a t

th e y a r e n o t a s w e ll s i t u a t e d a s th e c i t y b a n k s, w ith th e
c la s s o f p ap er th e y are d e a lin g in .
it

and d e p e n d on i t s

and t h e r e f o r e

T h ey c a n n o t r e a l i z e

p aym en t a s w e l l a s t h e

th e y f e e l ,

c ity

a s a m a tte r o f a a f e t y ,

on

banks oan,
t h a t th e y




2

3'

s h o u l d k e e p an e x t r a f i r e
M r. H a m ilt o n :
o o u n tr y

p er ce n t.

hV ery hank o a r r ie e th e

reserve

in

th e

a Rood d e a l i n r e l a t i o n t o t h e c o n v e n i e n c e t o
'
c e n ters,
c o m m e r c ia l fcdnfaftmnfi, i n o r d e r t o g e t c u r r e n c y .
T h ey a r e
l

g o v e r n e d m ore h y t h a t t h a n h y a l m o s t a n y t h i n g

n< '* it K - 1 i n u m - m u

e ls e ;

h u t I t h i n k t h e r e a r e v e r y fev ; h a n k s w i t h a c t u a l l y

m ore t h a n t h e t e n p e r c e n t o f t h e l e g a l r e s e r v e on h a n d ; h u t
I do n o t t h i n k i t
it

/

is

good p o l ic y

to

amend y o u r l a w an d make

m a n d a to r y .
MT* G i l l e s p i e :

Do y o u t h i n k t h a t

a c o u n tr y bank o r any o th e r k in d ,
c o n fid e n c e to

s ix per cent reserv e,

is

to

in s p ir e

T hey b e g in t o

t h e p a t r o n s o f t h e bank?

s u ffic ie n t

fig u r e .

T h i s p a n i c w as a p a n i c o f men who c o u l d f i g u r e ,
T he C o m p t r o lle r o f t h e C u r r e n o y i n h i s

y o u k n ow .

sta te m e n t e a lln d
s,

a tte n tio n

to th e r e s e r v e s b e in ' to o

f i g u r e w hat t h i s

b an k h ad

an d t h e r e t h e y f i n d
u n e a s in e s s .
e s p e c ia lly
tig h t,

zo

m eet i t s

T hey b e g in t o

dem an d s a b s o l u t e l y ,

A
a l i t t l e .o v e r s i x p e r c e n t .

T h e y b e g i n t o w an t t o
if

s m a ll.

th e y se e

b e g in t o

engenders

g e t t h e i r m oney o u t ,

s ig n s o f d an ger.

T h in g s b e g i n t o

w i t h i n t e r e s t r a t e s r u n n in g u p , a n d t a l k

a sse ts,

It

get

o f bad

a n d a l l t h a t ,( a n c T d i s h o n e s t m an agem en t^ ) an d t h e y
fig u r e

on t h e c o n d i t i o n o f t h e b a n k ,

t h i s bank h a s o n ly s i x p e r c e n t a s a r e s e r v e .
t o o s m a ll t o

and h e r e
I s n ot th a t

i n s p i r e c o n fid e n c e ?

Mr. H a m ilt o n :

T hat d o e s n o t e n t e r

in to

t h e ratal g e n e r a l

m in d o f t h e p u b l i o .
Mr* G i l l e s p i e :
can o a lo u la t e ,

It

e n te r s in to

t h e m in d o f t h e man who

an d who k n ow s s o m e t h in g a b o u t b a n k in g ;

t h i s w as h i s p a n i o .

an d

3

V




n r . H a m ilt o n :
-r
r»
fig u r e

T h is w as a b a n k e r ’ s p a n ic .

G ille s p ie :

on t h e

T h i s w a s a p a n i c o f men who c o u l d

s itu a tio n .

Mr. H a m ilt o n :

R ut i t

d id n o t a f f e c t

th e

s m a ll

c o u n t r y p l a c e s u n t i l a f t e r t h e c o m m e r c ia l c e n t e r s w e n t on a
c le a r in g -h o u s e b a s is .
Mr. G i l l e s p i e :

T h ey s u s p e n d e d t h e i r p a y m e n ts ;

or i f

it

h a d g o n e on t h e y w o u ld h a v e .
M r. H a m ilt o n :
Mr. G i l l e s p i e :

^ h ic h ?
The s m a l l c o u n t r y b a n k s .

In a l l

p r o b a b i l i t y a g r e a t many o f th em w o u ld h a v e h a d a ru n l i k e
t h e o t h e r s ^ an d t h e r e t h e y a r e c a u g h t w i t h a l i t t l e

o ld

s ix per c e n t.
Mr. H a m ilt o n :
co u n tr y banks in
tim e ,

I b e g y o u r p ard on s,

th e n a t io n a l sy ste m ,

A m a jo r ity o f th e
even a t th e p r e s e n t

d i d n o t s u s p e n d p a y m e n t.
Mr. M oH enry:
Mr. M cK in n ey:
Mr. H a m ilt o n :

T h a t w as t r u e up i n my d i s t r i c t .
T hat w as t r u e
T h ey d i d n o t

i n lay r e g i o n .

su sp en d a t a l l .

T here i s

o n l y h e r e and t h e r e a p l a c e t h r o u g h o u t t h e S t a t e s .
in

I llin o is .

A m a jo r ity o f th e b an k s in I l l i n o i s ,

o f C h ic a g o , P e o r i a , B lo o m in g t o n an d

Q u in c y ,

T ake i t
o u ts id e

I th in k ,

d id

n o t s u s p e n d c a s h p a y m e n t.
Mr. G i l l e s p e i :

I know t h a t l i t t l e

o f tw o o r t h r e e th o u s a n d p e o p l e ,
The A c t i n g C h a irm a n :
Mr. M oH enry:
a t P itts b u r g ,

tow ny i n my d i s t r i c t ,

su sp en d ed .

Ve d i d n o t .

I n th e l a r g e c i t i e s

an d P h i l a d e l p h i a f o r

in P e n n s y lv a n ia ,

a s h o r t tim e ,

and H a r r is ­

b u r g , we h a d s u s p e n s i o n s } b u t a t S c r a n t o n and W i l k e s b a r r e




n o n e o f o u r "banks w e r e a f f e c t e d , a t a l l .
Mr. M oC reary:
verge.

If

it

T h ey d i d n o t .

b u t t h e y w ore on t h e

h a d k e p t up a w eek o r t e n

w o u ld h a v e s u s p e n d e d .
p a r tic u la r ly ,

days lo n g e r th e y

I ca n s p e a k o f o n e l a r g e t o v n t h e r e ,

w h e r e t h e p a y o f t h e R e a d in g k e p t e v e r y t h i n g

g o i n g , b u t t h e moment t h e y r a n i n t o p a y i n g c a s h ,
b a n k s w o u ld h a v e f e l t
M r, M cK in n ey:

th e

it.

MT. G i l l e s p i e ,

do y o u m ean t h e r e s e r v e

t h a t t h e b a n k s h a v e i n t h e i r own o f f i c e s ?
?fr.

G ille s p ie :

Y es;

Mr. M cK in n ey:
m any y e a r s .
about s ix

in t h e i r

own v a u l t s .

I w as c o n n e c t e d w i t h a b a n k f o r a g o o d

As a r u l e

I t h i n k we k e p t

or e ig h t p e r c e n t ,

in o u r o f f i c e

b u t - e had in th e h on d s o f cu r
w
,/

c o r r e sp o n d e n t,

an d i m m e d i a t e ly a v a i l a b l e

r a n b e lo w f i f t y

p er oen t o f ca sh lo a n s .

m ore i n o u r o f f i c e

o n ly

we 'T ^aost n e v e r
We d i d n o t k e e p

f o r t h e r e a s o n t h a t we 44-d n o t c on s i t te r -✓

it

h a r d ly s a f e .

Of c o u r se ,

n o t th e p o lic e p r o te c tio n

in

s m a l l c o u n t r y to w n s t h e r e

th a t you h a v e in la r g e

is

to - n s .

V/e

7,

c a r r ie d
th is

i n s u r a n c e a g a i n s t b n rp fr a r ltl a r i e s apd a l l
ir g T .r

s ix

th a t,

but

o r e i g h t p e r c e n t we fo u n d a d e q u a t e t o m e e t a l l

th e

n e e d s we h a d .
M r. G i l l e s p i e :

Y es,

in norm al t im e s ,

t h e m on ey t h a t y o u d e p o s i t ^
and i t

su p p o r ts d e p o s it s .

per o e n t.

I b e lie v e

o f cou rse;

but

o f i t s e l f becom es a r e s e r v e
T he l a w o n l y r e q u i r e s f i f t e e n

i f we h a d n o la w on t h e

su b ject

a ll

.

b a n k s w o u ld c a r r y a g r e a t d e a l m ore r e s e r v e s t h a n n ow .
MT. H a m ilto n :
d e p o s ite d
r e a lity

T here 1b a o e r t a in p o r t io n o f

i n o o m m e r o ia l c e n t e r s ,

c a lle d a r e se r v e ,

d o e s n o t b e l o n g t o t h e r e s e r v e fu n d a t a l l .

d e p o s its
th a t

in

It

is




th e ir

e x c e ss d e p o s its .

It

is

n o t r e a l l y p u t up f o r t h e

r e a s o n o f c o m p ly in g w i t h t h e l a w r e l a t i v e
th e f i f t e e n

per cen t r e se r v e .

It

is

to m a in ta in in g

k ep t th e r e

p u r p o s e o f g e t t i n g w h at i n t e r e s t t h e y c a n ,
and t h e

c o n v e n ie n c e o f h a v in g i t ;

s m a ll p l a c e s ,

an d

fo r th e

and a l l t h a t ,

in th e m a jo r ity o f

e x c h a n g e i s m ore d e s i r a b l e

g e n e r a lly

th a n

a c tu a l n o te s o f hand.
Now, t h e n e x t

s e o tio n

is

s e c tio n

6,

r e la tiv e

to

g u a r a n t y f u n d , w h ic h p r o v i d e s th c?.t t h e t a x r e c e i v e d
th e se

c r e d it n o te s

s h a l l be d e p o s it e d

in

th e
fr o m

su c h a fu n d ,

fe c tio n

7 p r o v id e s t h a t b e fo r e th e s e

c r e d it n o te s

th e bank c o n te m p la t in g t h e i r

i s s u e m u st d e p o s i t w i t h t h e

T r e a s u r y D e p a r tm e n t a sum e q u a l t o
te m p la te d i s s u e ,

ca n b e i s s u e d

f iv e p er cen t o f th e

c r e a t in g t h e g u a r a n ty fu n d a t o n c e .

a f t e r th e r e c e ip t s

eq u a l th e

con­
And

am ount o f t h i s

f iv e per c e n t,
hank
t h e n t h e o r i g i n a l d e p o s i t m ay h e r e f u n d e d t o t h e ftnrii o f
is s u e .
S e c t i o n 8 p r o v i d e s f o r t h e r e d e m p t io n c i t i e s .
Mr. M oK in n ey:

B u t when y o u r e f u n d t h e o r i g i n a l

d e p o s it,

a f t e r you h a v e r e a c h e d 5 p e r c e n t th r o u g h t h i s t a x fu n d ,
y o u r f i n d w i l l k e e p on i n c r e a s i n g an d a c c u m u la t in g ?
TTr. H a m ilt o n :

we h a v e made n o p r o v i s i o n

M r. M cK in n ey:

But i t

fo r a lim it

n a t u r a l l y w i l l k e e p on i n c r e a s i n g

and a c c u m u la tin g .
M r. H a m ilt o n :
t a x now c o n t i n u e s

T he t a x c o n t i n u e s j u s t

same a s t h e

on n a t i o n a l h a n k n o t e i s s u e s .

M r. G i l l e s p i e :
a fu n d t o

th e

Is

it

you r p u rp ose th a t

be c o v e r e d f i n a l l y

in to

th a t

s h a l l ho

th o g e n e r a l t r e a s u r y ,

or to




6

be h e ld

a s a s p e c i a l f u n d t o go e v e n t u a l l y ,

b a c k t o t h e b a n k s?

if

not u sed ,

What i s y o u r i d e a a b o u t w h a t o u g h t t o

be done w ith th a t?
M r. H a m ilto n :
th a t

T he t h o u g h t o f t h e C o m m itte e w a s t h a t

fu n d p r o b a b ly w o u ld b e l o n g t o

t h e F e d e r a l G o v ern m en t;

b u t we d i d n o t a t t e m p t t o p r o v i d e w h at c o u r s e
p u rsu ed w ith t h a t ,

fo r th e r e a so n th a t none o f u s w ere

f a m i l i a r w i t h t h e n e e d s o f t h e G o v ern m e n t,
m ig h t w i s h t o a p p l y I t }

and w h e r e y o u

h a v i n g i n mp m in d t h e c r e a t i o n

o f a fu n d s u f f i c i e n t l y l a r g e t o m e e t a l l t h e
t h e m an agem en t
th e n o te s

s h o u ld b e

o f t h i s d e p a r tm e n t,

exp en ses o f

and g i v i n g

s e c u r ity to

is s u e d .

M r. M cK in n ey:

N o t h in g h a s e v e r b e e n d o n e , h a s i t ,

to w a r d s -a n y ^ -d i-cty i-b u t i oi r xm t o w ard a n y d i s t r i b u t i o n
fu n d t h a t h a s b e e n c r e a t e d t h r o u g h t h e l o s s
bank n o t e s ,
Mr.

o f th e

o f n a tio n a l

i n a l l t h e y e a r s s i n c e t h e n a t i o n a l b an k a c t ?

G ille s p ie :

Mr. M o K in n ey :

N one t h a t

I am a w a re o f .

T h is w o u ld n o t go i n t h e sam e c a t e g o r y .

You know t h e r e h a s b e e n a p r o f i t
on a o c o u n t o f t h e l o s s

a lw a y s t o t h e

an d d e s t r u c t i o n

/

governm ent

and so on o f n a t i o n a l
/

bank n o t e s .
M r. G i l l e s p i e :
Mr. M cK in n ey:

Y es.
The a s s u m p t io n b e i n g t h a t a n y o f t h e n o t e s

t h a t w e r e e v e r i s s u e d m ig h t come up f o r r e d e m p t io n a t som e

Jr

tim e .
M r. G i l l e s p i e :
Mr. H a m ilto n :

Y es.
S e o tlo n

t h e r e d e m p t io n c i t i e s .

8 o f t h i s m ea su re i s

We t h i n k t h a t ,

as

it

r e la t iv e to

sta te s

th e r e ,

t h e y s h o u l d b e n o t m ore t h a n 2 4 h o u r s d i s t a n t fr o m t h e b a n k .
In o t h e r w o r d s ,

it

m ig h t

n e c e s s ita te

th e c r e a tio n

of




kv

a d d i t i o n a l r e d e m p t io n c i t i e s

fr o m

we now h a v e a s r e s e r v e c i t i e s —

th e fo r ty -tw o
reserve

c ity

c itie s

p o in ts - —

and we b e l i e v e t h a t t h e m ore c o n v e n i e n t t h e s e r e d e m p t io n
c itie s

are th e

q u i c k e r t h e n o t e s w i l l be r e t u r n e d a n d r e ­

tir e d ;

an d t h e

s u c c e s s o f th e p la n r e s t s l a r g e l y

v e n ie n c e o f t h e s e p o in t s .
p resen t
to

sy stem

r e tir e

is

T hat i s ,

n o t e s r e m a in o u t s t a n d i n g ,
and b e i n g c a n c e l l e d ,
tir e d .

e t c .,

th e le n g th

th a t

and t h e l i m i t e d

i m m e d i a t e ly when t h e y

tir e d

am ount t h a t may b e r e ­
c r e d it n o t e s c o u ld

came i n ,

an d i t

is

e x p e c te d

in d iv id u a l

c o r r e s p o n d e n c e an d w o u ld b e r e ­

at once.
T h e A c t i n g C h airm an :

r i ht th e r e .

T he A o t i n g

I w o u ld l i k e

How a r e t h e s e

M r. H a m ilt o n :

By t h e

be re d e em ed ?

Y es.
c o r r e sp o n d e n t^ o f th e

i n t h e c o m m e r c ia l c e n t e r , w h e r e v e r i t
The A c t i n g C h airm an :
MT. H a m ilt o n :

Oh,

to a sk a q u e s tio n

to be redeem ed.

How a r e t h e y t o

C h airm an :

Mr. H a m ilt o n :

know .

ta k e s

o f t im e t h a t t h e

t h a t t h e y w o u ld b e c h a r g e d t o t h e a c c o u n t o f t h e
b a n k i s s u i n g th em b y t h e i r

it

d e p e n d in g u p o n g e t t i n g t o W a s h in g to n

O f c o u r s e u n d er t h i s m ea su re th e

be r e t ir e d

con­

T he g r e a t t r o u b l e e v e n u n d e r t h e

th e le n g t h o f tim e ,

th e n o t e s .

on t h e

in s titu tio n

may b e .

I n w h a t k i n d o f m on ey o r c u r r e n o y ?
i n l a w f u l m o n ey , o r l i k e

n o t e s , you

T h ey may b e r e d e e m e d i n e i t h e r .
The A o t i n g C h airm an :
M r. H a m ilt o n :
M r. G i l l e s p i e :

It

D oes y o u r b i l l

so s t a t e ?

s a y s i n l a w f u l m o n ey .
T hat d o e s n o t

T he A o t i n g C h airm an :

mean t h i s k in d o f n o t e .

T h a t w o u ld n o t b e l a w f u l m o n ey .

Our
Mr» G i l l e s p i e :

ttfea s t a t u t e

d e f i n e s w h a t l a w f u l m on ey




8

H

1b — -

3

le g a l te n d e r .

Mr. H a m ilt o n :

T h is b i l l ,

Mr* G i l l e s p i e :

I th in k ,

T h is s a y s ,

covers th a t.

" L a w fu l m o n ey " ,

ju st lik e

th e p r e s e n t bank n o t e .
T he A c t i n g C h airm an :
Mr* G i l l e s p i e :

What s e c t i o n

S om ew h ere h e r e i t

is

th a t?

sa y s th a t

it

s h a ll be

r e d e e m e d i n l a w f u l m o n ey .
T he A c t i n g C h airm an :
th a t

We h a v e so many d i f f e r e n t b i l l s ,

I am a f r a i d we m ix th em tip .
M r. H a m ilt o n :
M r. C ox:

It

M r. H a n i l t o n :
TIT

C ox:

is

Of cou rse s e c tio n
in

s e c tio n

1 3 s p e a k s o f t h e -----

6.

R ea d i t .

"T h at t h e t a x e s upon n a t i o n a l b a n k g u a r a n t e e d
tw o an d t h r e e

c r e d i t n o t e s , p r o v id e d f o r

in

o f th is

i n l a w f u l m oney t o

a c t,

s h a l l be p a id

s e c t i o n s dmn

th e T rea su rer

o f th e U n ite d S t a t e s . "
The A c t i n g C h airm an :
th e ta x e s .

But th a t

an d I come t o

w i t h som e o f y o u r n o t e s ,

I llin o is ,

a s t o t h e p a y m en t o f

Now, y o u h a v e a r e d e m p t io n c i t y

C o m p t r o ll e r o f t h e C u r r e n c y ,
c ity

is

c r e a te d by th e
t h a t r e d e m p t io n

is s u e d b y y o u r bank in

and I a s k t o h a v e t k o s e n o t e s r e d e e m e d .

t h e y p a y me i n e x o h n n g e f o r t h o s e n o t e s ;
s t a t e w hat i t

s h a ll c o n s is t

Mr. M cK in n ey:

S e c tio n

The A c t i n g C h airm an :

What w i l l

and d o e s y o u r b i l l

o f?
8 p r o v i d e s f o r t h e r e d e m p t io n .
But i t

le a v e s

it

e n t i r e l y w ith

t h e C o r a p tr o lle
M r. H a m ilt o n :

I g u ess i t

b e c a u se I s e e no p r o v is io n
Mr. M c C rea ry :
s h a l l r e q u ir e

is

le ft

w ith th e d e p a r tm e n t,

as to t h a t .

A b s o lu te ly ,

b ecau se i t

sa y s th a t he

s u c h b a n k t o make a r r a n g e m e n t s s a t i s f a c t o r y t o




9

h im .
T he A c t i n g C h airm an :
o p en ?

Do y o u n o t t h i n k t h a t l e a v e s

S u p p o se h e i n s i s t e d
Mr. H a m ilto n :

t h a t you redeem i t

S e c tio n 12 —

d e s ir in g to

g u a r a n te e d c r e d it n o t e s o r t o
in to

c o in ?

I do n o t k n o -' w h e t h e r t h a t

c o u ld he c o n s tr u e d t o a p p ly o r n o t :
h a n k in g a s s o c i a t i o n

in g o l d

it

"T h at a n y n a t i o n a l

r e tir e

its

n a t i o n a l b an k

go i n t o l i q u i d a t i o n

s h a ll pay

t h e g u a r a n t y fu n d a n am ount o f l a w f u l m on ey e q u a l t o

t h e am ount o f i t s

n a t io n a l hank g u a r a n te e d c r e d it n aa n o t e s

th e n o u t s t a n d in g ."
T hat i s ,

when i t

is

g o in g ou t o f b u s in e s s .

itr
T h e A c t i n g C h airm an :
r e t i r e , aw l you say th e
{

B u t i f -hq d o e s n o t w a n t t o

in te r e s t

o f a n y o t h e r h a n k w o u ld

:

h e s t r o n g enough t o

se n d y o u r n o t e s

d eem ed s o a s t o l e a v e a p l a c e f o r

i n an d h a v e th em r e ­

its

n o te s to he p ut in

c ir c u la tio n .

How t h e n , I am t h a t o t h e r h a n k .
I have your
s t ep
n o te s.
I
t o t h e r e d e m p t io n
a g e n c y , an d a s k t o h a v e
n o te s
y o u r n o t e s r e d e e m e d , t o g e t r i d o f th em so t h a t my iihUal can
ta k e t h e ir p la c e .

What do I r e c e i v e
n o te s,

a it f o r y o u r

M r. H a m ilto n :
th e m e a su re.

I

som e w a y .

gu ess th a t

I th in k th a t i s

How,

a good d e a l in t h i s

r e tu r n

or exch an ge

or your h i ll s ?

The A c t i n g ChAtrm an:
in

in

i s n o t p r o p e r ly c o v e r e d in

a v it a l c r itic is m .

I th in k th a t ou ght to h e c o v e r e d

in c o n n e c tio n w ith t h a t ,
C o m m ittee - —

we h a v e h e a r d

t h e o l d e r m em bers —

t h e d a n g e r o f t h r o w in g t o o m uch u p on t h e

g o ld r e s e r v e ,

u p o n g o l d a s a b a s i s o f r e d e m p t io n o r e x c h a n g e .

It

of
or

is

c l a i m e d t h a t b y r e a s o n o f o u r k e e p i n g o u r m oney on a p a r i t y ,
BBtattanMn

th e

s ilv e r

can he exch an ged fo r g o ld ,

th a t th e




\

10

T reasu ry n o te s

can be exch an ged f o r

can be exch an ged f o r
i s s u e d and i n
f o ld .
^

ftO ld f t h a t t h e

greenbacks

t h a t n a t i o n a l b an k n o t e s a r now

c ir c u la tio n

A

^

can be exch a n g ed fo r

I f t h e r e h a s b e e n a d a n g e r up t o

th is tin e ,

an d y o u

th r o w a n e x t r a b u r d e n o f tw o o r t h r e e h u n d r e d m i l l i o n s
upon t h a t
little

sam e fu n d ,

a r e y o u n o t m a k in g t h a t g o l d b a s i s a

d a n g ero u s f o r th e p u r p o se o f k e e p in g a l l k in d s o f

m on ey a t a p a r i t y }

and a s a m a tte r o f f a c t

n o t. y o u r k in d

t*

o f c u r r e n c y a s w e l l a s t h e A l d r i c h c u r r e n c y , -t-o—t lie—e x t a n t
h at you is s u e t h i 3 cu rren o y ,

do y o u n o t t o

th a t ex ten t

b u r d e n o u r p r e s e n t g o l d a s a n a g e n t f o r t h e r e d e m p t io n o f
o t h e r m oney?
Mr. H a m ilt o n :

I

s h o u ld t h in k

T he A o t i n g C h a irm a n :

Is

o f t h e w h o le sch em e a n d p l a n
and i f

it

is not

s.

it

w o u ld .

t h e r e n o t a d a n g e r g r o w in g o u t
o f t h i s k in d o f c u r r e n c y ,

d a n g e r t e l l why i t

Mr. M cK in n ey:

Mr. C h a irm a n ,

w h o le t e n o r o f t h i s b i l l

is

it

is

n o t.

s e e m s t o me t h a t t h e

a g a in s t t h a t .

sta te s

in w hat

w ay t h e n o t e s

is s u e d

it

t h a t t h e y m u st b e r e d e e m e d b y t h e d e p o s i t

w as s t a t e d

ca n b e m r e d e e m e d .

It

I n a fo r m e r b i l l
of

g o ld .
A o tin g
T h e ^ C h airm an :
M r. M cK in n ey:

T hat i s
Y es.

t h e new H o w le r b i l l ,
In t h i s b i l l

it

s o -c a lle d .

mm&ua c a n b e r e ­

d eem ed b y d e p o s i t i n g l a w f u l m o n ey .
T he A c t i n g C h airm an :

H o,

it

le a v e s

it

in th e

d is c r e tio n

o f th e B e o r e ta r y o f th e T r e a su r y .
M r, M cK in n ey:

It

d oes a fte r w a r d ,

T he A o t i n g C h airm an :
t h i s—
Iq t h e

T hat i s

back h e r e .

w hen y o u r e t i r e

c u r r e n t, r e d e m p t io n o f t h e n o t e s .

it}

but




Hr. J^cKinney:
d iffe r e n t
m o n ey ,

I t scorns to mo th e re should be a

sta te m e n t h ^ re,

t o make i t

b ill.

th o u g h ,

th a t

h a r m o n io u s w i t h t h e

it

s h o u ld be in la w f u l

o th e r p r o v is io n s o f th e

.
^ i t -ne e e :

th a t

I th in k

it

w o u ld b e b e t t e r t o

am end i t

to

e x te n t.
The A c t i n g C h airm an :

o b j e c t i o n ft h a te- I mfeke?
§

-h a t have you to

We w i l l h a v e t o m e e t t h a t

H o u s e , n o m a t t e r w h at t h e p r o p o s i t i o n
M r. H a m ilto n :
b u r d e n on t h e

I th in k

it

c o n s id e r a tio n

sam e l e g a l

in th e

I am f r a iik t o

c o u n tr y .

th e f a c t

g e n e r a lly b e is s u e d vhen th e r e
and t h e

is ,

th a t-

say.

w o u ld th r o w an a d d i t i o n a l

g o ld r e s e r v e o f t h e

m u st t a k e i n t o

say to

is

th a t th e se n o te s w ill

a w it h d r a w a l o f t h e d e p o s i t s

r e s e r v e w o u ld a p p l y ,

on e f o r

th e

o th e r .

w ith th e r e s e r v e c i t y

th en i t

to

i n w h a t e v e r k in d o f m on ey may b e d e ­

redeem t h o s e n o t e s

m a n d ed .

up t o t h a t r e s e r v e a g e n t

The i d e a t h a t p r e v a i l s t h a t

e n a b l e b a n k s t o l o a n m on ey,
to

is

H ow ever, y o u

a c e r ta in

e x te n t.

I th in k

b e f o r e th e bank

A

is

For i l l u s t r a t i o n ,

b a n k an d w a n te d t o b o r r o w £ l | 0 0 0
it,

t h i s n o te

i s s u e w o u ld

an e r r o n e o u s o n e ,
if

a man came i n t o a

an d dem anded t h e c u r r e n c y f o r

c o u l d make t h a t l o a n

it

is

n ecessa ry

fo r

to h a re e q u iv a le n t t o r e a l l y t w e n t y - f iv e p er c e n t o f th e
«

a m o u n t,

even

in a c o u n tr y bank,

o t h e r w o r d s , t h e m oney t h a t

is

i n l e g a l r e s e r v e m o n ey .
r e q u ir e d

t h e g u a r a n t y fu n d an d t h e f i f t e e n
le n t

to

f o r r e d e m p t io n ,

per cen t r e se r v e ,

tw e n t y -fiv e p er cen t o f th e c a p it a l,

n e c e s s i t a t e then? t o h a v e 0 2 0 0 i n l e g a l

and i t

is

In
fo r
eq u iv a *

w o u ld

r e s e r v e m on ey b e f o r e

••

o o u ld make a l o a n o f $ 1 , 0 0 0
do n o t b e l i e v e

t h i s m e a su r e v d l l

in

c r e d it n o te s .

te n d to

So t h a t I

en cou rage banks to




12

l o a n t h e i r m oney f o r t h e

sak e o f g e t t i n g ou t t h e c i r c u l a t i o n ^

I th in k th e hanks w i l l

is s u e

it

w hen t h e r e

is

a heavy

,
1

w i t h d r a w a l,

and a c t u a l h i l l s

a re r e q u ir e d ,

and t h e y c a n u s e

t h e sam e r e s e r v e a g a i n s t t h e n o t e t h a t t h e y now u s e a g a i n s t
th e ir

d e p o s its ,

m a n n er.

an d p r o t e c t t h e r e s e r v e o f t h e c o u n t r y i n t h a t

Of co u rse

s e c tio n

th e p la n o f c o m p le tin g th e
c o n tr o lle d ,
n o tic e ,

to

8 le a v e s

o r g a n iz a tio n ,

and how i t

m e n ts s a t i s f a c t o r y

s u c h h a n k t o make a r r a n g e ­

t o h im f o r t h e c u r r e n t d a i l y

i n e v e r y r e d e m p t io n c i t y

T he A c t i n g C h airm an :

V /e ll,

in

r e d e m p t io n

so d e s i g n a t e d , "

a governm ent o f p a r t i e s ,

w h e r e o n e s t a y s a w h i l e a.nd t h e n a n o t h e r co m es i n ,
c u r r e n c y q u e s tio n
w o u ld i t

is

in v o lv e d

in

n ot he b e t t e r to le a v e

C on gress to
redeem i t

our p o l i t i c s
it

an d t h e

so c l o s e l y ,

under th e c o n tr o l o f

s t a t e j u s t w h at s h o ii l d h e t h e k i n d o f m on ey t o

in ,

r a th e r th a n t o l e a v e

h a v e o n e o p i n i o n now ,
o p in io n —

s h a ll he

t h e C o m p t r o lle r o f t h e C u rre n c y * , y o u w i l l

- S h f t V "he s h a l l r e q u i r e

o f su ch n o te s

go o d d e a l

to

o n e m an, who may

and fei-s-v s u c c e s s o r may h a v e a n o t h e r

w h ic h *»*■■ we f i n d

Mr. H a m ilto n :

it

is

o fte n th e case?

O f c o u r s e t h e m ore c l e a r l y y o u d e f i n e

a n y t h i n g o f t h a t k in d t h e h o t t e r t h e h i l l
T he A c t i n g C h airm an :
Mp. M cK in n ey:

I ju st

su g g est th a t.

S u p p o se y o u add a t t h e
sta te

is .

c lo s e

o f s e c tio n

8 , w here i t

g o e s on t o

t h a t t h e C o m p t r o lle r s h a l l r e ­

q u ir e s u c h

h a n k t o make a r r a n g e m e n t s s a t i s f a c t o r y

t o h im

f o r t h e c u r r e n t d a i l y r e d e m p t io n o f s u c h n o t e s i n e v e r y r e ­
d e m p tio n c i t y

so d e s ig n a te d ,

" in l a w f u l m on ey o f t h e U n i t e d

S ta te s" ?
The A c t i n g C h airm an :
w o u ld know w h a t i t

w as.

W e ll,

t h a t w o u ld p u t i t

w here y o u




Hi

13

Mr. M oC reary:

How w o u ld t h a t a f f e c t

th o se

T h ey c o u l d h e p a i d

n o t e s , Mr. H a m ilto n ?

em ergency

in k in d ,

c o u ld

th e y n o t?
Mr. H a m ilt o n :

I t h in k t h e y s h o u ld he p a id in k in d .

Mr. M cC rea ry :

A re t h e y n o t

t o h e v/h at we

c o n s i d e r l a w f u l m oney?
M r. H a m ilt o n :
Mr. M cK in n eJ :

Y es.
T h e s e n o t e s a r e l a w f u l m on ey w hen y o u

w a n t t o p a y o f f som e o t h e r h a n k .
Mr. H a m ilt o n :
9 o f th e h i l l

is

You s e e t h a t t h e h a n k n o t e

in

s e c tio n

g iv e n th e sa n e p ow ers i d e n t i c a l l y

a s th e

p r e s e n t n a t i o n a l h an k n o t e .
Mr* G i l l e s p i e :
H r. M cC rea ry :

The h a n k n o t e i s
T here i s

We s h o u l d p u t i n t h e r e
I t ir

H a m ilto n :

M r. M oC reary:
n o te s

n o t l a w f u l m o n ey .

w here y ou g e t th e

" or n o t e s

in k in d ."

I t m ig h t h e b e t t e r t o
And t h e n y o u h a v e i t

i n k in d " , an d i f
9

c o n fu s io n .

add t h a t .
" l a w f u l m on ey o r

t h e y h a v e an e x c h a n g e i n f a v o r o f t h ^ U^
A
S

t h e y w o u ld s e n d h a c k t h e n o t e s i n p a y m e n t,
M r. M cK in n ey:
n o te s

L a w fu l m on ey o f t h e U n i t e d S t a t e s ,

or

i n k in d ?
Mr. M cC rea ry :

L a w fu l m o n ey , o r n o t e s

in k in d .

It

does

n o t m ooli t h e w o r d s o f t h e U n i t e d S t a t e s .
Mr. G i l l e s p i e :
m oney i s .

H ere i s

a d e fin itio n

o f w hat la w f u l

T h e t e r m " l a w f u l m oney" i s u n d e r s t o o d t o

a p p ly t o

e v e r y fo r m o f m oney en d ow ed h y la w w i t h l e g a l t e n d e r
q u a litie s .

T h is i s

n o t la w f u l m oney.

It

c o u ld n o t h e r e ­

d eem ed i n i t s e l f .
Mr. M oC reary:

But

i f you g e t

" n o t e s i n k in d "

in t h e r e ,




w o u ld t h a t n o t ho t r u e ?
H r . H a m ilt o n :
th a t

if

You do n o t w an t t h i s k in d o f a c o n d i t i o n *

I r e c e i v e n o t e s o f y o u r b an k y o u c o u l d p a y me i n

n o t e s o f some o t h e r roan’ s b a n k .
Ho; b u t i f y o u s e n d t h e s e

Mr. M cC rea ry :

em ergency

I c a n p a y y o u i n o u r n o t e s -ok* g e t r i d o f

n o t e s f o r p a y m e n t,
th e m i n t h a t w a y .
Mr. H a m ilt o n :

1 do n o t t h i n k t h a t w o u ld b e s a f e .

Mr. M cK in n ey:

In c a s e you a r e g o in g to redeem y o u r

n o te s,

and l i q u i d a t e

a d e p o s it

o r go o u t o f b u s i n e s s , t h i s

r e q u ir e s

o f l a w f u l m oney o f t h e U n i t e d S t a t e s .

n ot a n o th e r p r o v is io n
be in l i n e

Why w o u ld

t h a t t h e s e b e r e d e e m e d i n l a w f u l m oney

w ith th a t f i n a l p r o v is io n ?

Mr* W eems:

-It, w A uld n o t b e r e t i r e d

at a ll,

i f you

r e d e e m e d th em i n n a t i o n a l b a n k n o t e s .
Mr. M cK in n ey:

I f t h e y w e r e r e d e e m e d i n l a w f u l m oney

i t w o u ld b e a l l r i g h t .
I!r*

G ille s p ie :

b i l l to put it

It

s e e m s t o me i t

" r e d e e m a b le i n

IIi*/ H a m ilt o n :

g o ld ."

T he C o m m itte e , y o u u n d e r s t a n d ,

*

it

Any am endm ent t h a t w i l l

we w o u ld b e g l a d t o h a v e .

M r. G i l l e s p i e :
but i f

are n ot

i

e n t i r e l y h id e - b o u n d t o t h i s m e a s u r e .
str e n g th e n

w o u ld s t r e n g t h e n y o u r

t h e y k now i t

The p e o p l e d o n o t c a l l f o r t h e g o l d ,
is

th er e

it

s tr e n g th e n s th e b i l l

in th e

p o p u la r e s t i m a t i o n .
Mr. M cK in n ey:
W ith l a w f u l m o n ey ,

B u t w h at i s
i f you d e fin e

th e p r a c t ic a l d iffe r e n c e ?
it

a s b e in g o n ly T r e a su r y

n o te s —
M r. G i l l e s p i e :
th e

g o ld to

r e tir e

T hen t h e G overn m en t w i l l h a v e t o
t h e l a w f u l m on ey; b u t i n t h i s

fu r n is h

c a s e th e bank




Will h a v e t o f u r n i s h t h e g o l d .
jar. M cK in n ey:
y o u w ant to
j£r.

get

T he l a w f u l m oney i s

T h i s w o u ld r e q u i r e

B u t t h e G o v ern m en t h a s t o
th e banks th e m s e lv e s t o

redeem t h i s

in h i s new b i l l ,

th e n o te
n o te .

if

in

fu r n is h i t .

f u r n is h th e g o ld

currency.

T he A c t i n g C h airm an :
says

g o ld ,

it.

G ille s p ie :

w i t h w h ic h t o

good f o r

L ot no r e a d y o u w hat
c o n n e c tio n w it h t h i s .

in t h e s e w o rd s:

r.

B o w le r

Ke d e s c r i b e e

" N a tio n a l bank g u a r a n te e d c r e d i t

W i l l b e r e d e e m e d u p on dem and o v e r i t s

own c o u n t e r

b y t h e --------- n a t i o n a l B ank

in

T he p a y m en t o f t h i s n o t e i s

g u a r a n t e e d b y t h e fu n d d e p o s i t e d

w ith th e

g o ld

c o in or

its

t r e a s u r e r o f th e U n ite d S t a t e s . "

o n e ^ a s I now r e c a l l ^ J o f t h e b i l l s

It

In th e o t h e r s ,

b a c k u p o n t h e G overn m ent t c

f u r n is h t h e g o ld to

and i f

e x e r c is e

its

t h e G overn m en t h a s n o t t h e
p o w er u n d e r t h e l a w t o

t h a t a w is e m ea su re, w ith th a t

th e r e

g o ld

t h e o n ly

i3

a burden

redeem th e

it

th en h a s to

c e l l b ond s to

g o l d w i t h w h ic h t o r e d e e m t h e s e n o t e s .
is

is

u n d e r d i s c u s s i o n ) w h ic h

r e a l l y ro d eera p s t h e n o t e s .

n o te s,

e q u iv a le n t.

g e t th e

The q u e s t i o n

in th e b i l l ,

is ,

^ o u ld i t

n o t b e b e t t e r t o th r o w t h e b u r d e n o f r e d e e m in g t h i s c u r r e n c y
u p on t h e b a n k i t s e l f ,
is

a n e o e s s ity

is s u in g

of it

b eca u se i t

fo r i t ,

and i f

is s u e s

th e n e c e s s it y

o n l y v.'h<jn t h e r e
a r is e s

fo r th e

t h e b an k s h o u ld p r o v i d e i t s e l f w i t h m ea n s t o

r e d e e m t h e m on ey i n th e . c a s e o f s t r e s s
t h a n t o th r o w t h e
o f str e ss

it

or em erg en cy ,

ra th e r

e x t r a b u r d e n u p on t h e G overn m en t i n t im e

o r e m e r g e n c y to-Sme**4j. e x t r a g o l d v / i t h w h ic h t o

m eet t h e s e .
Mr* H a m ilt o n :

The ‘b i l l o f l a s t y e a r ,

y o u k now ,

d id




16

r e q u i r e t h e r e d e m p t io n o f t h e n o t e s u n d e r s e c t i o n

12,

in

g o ld .
T he A c t i n g C h a irm a n :
M r. H a m ilt o n :

I w as j u s t lo o k in g t h a t u p .

I have i t h ere:

b a n k in g a s s o c i a t i o n d e s i r i n g t o

"T hat a n y n a t i o n a l

r e tir e

its

n a t io n a l bank

g u a r a n t e e d c r e d i t n o t e s o r go i n t o l i q u i d a t i o n
in to

s h a ll pay

t h e g u a r a n t y fu n d an am ount o f g o l d c o i n e q u a l t o

am ount o f i t s

th e

n a t i o n a l b an k g u a r a n t e e d c r e d i t n o t e s t h e n o u t ­

s ta n d in g . "
How,

s e c t i o n s t e n and e l e v e n a p p l y t o a n y c a s e o f a
In th e
bank.
22fcra M cK in n ey b i l l , t h e o n e y o u h a v e b e f o r e

fa ile d
y o u , we

m ake t h e s e n o t e s a f i r s t

on t h e a s s e t s o f
" th a t
L a s t y e a r t h e b i l l p r o v i d e d , ftta fe

t h e b a n k in g i n s t i t u t i o n .

lie n

th e h o ld e r o f an y n a t io n a l bank g u a r a n te e d c r e d it n o t e
be a g e n e r a l c r e d ito r
is s u in g

it ."

s h a ll

o f t h e n a t i o n a l B a n k in g A s s o c i a t i o n

T hat i s

s e c tio n

te n .

T h is y e a r i t

read s,

"T hat t h e h o l d e r o f a n y n a t i o n a l b a n k g u a r a n t e e d c r e d i t n o t e
s h a ll have a p r io r l i e n
B a n k in g A s s o c i a t i o n

on t h e a s s e t s

I s s u in g i t

o f th e

n a tio n a l

an d on t h e s t a t u t o r y l i a b i l i t y

o f s h a r e h o ld e r s ."
T h e A o t i n g C h airm an :
11*. H a m ilt o n :
c r itic is m

th 't

s e lv e s

arose

i n t h e m in d s o f t h e p e o p l e a s t o
I am f r a n k t o

th e

c o n fe ss th a t th e

w a s a b o u t e q u a l b e tw e e n t h e n a t i o n a l b a n k e r s th em ­

and t h o s e n o t

seem ed t o

change?

Y/e made t h e c h a n g e on a c c o u n t o f t h e

s e c u r ity o f th e s e n o te s .
c r itic is m

V7hy d i d y o u m ake t h a t

i n t h e n a t i o n a l b a n k in g s y s t e m .

th in k yo u r s e c t io n

w as n o t b r o a d e n o u g h .

T hey
I m y s e lf

w a s o n e o f t h o s e 'Urnf. ivaa o p p o s e d t o tiat* m a k in g <s£ s u c h
m

n o te s a f i r s t
b e lie v in g th a t

lie n
it

upon th e a s s e t s
w o u ld d i s c r e d i t

'

o f th e n a tio n a l bank,
th e

in s titu tio n

is s u in g

it.




J X

AY

H o w e v e r , t h e r e s e e m 3 t o b e a dem and on t h e p a r t o f t h e p u b l i o
7r*<"

fo r g r e a te r

s e c u r ity ,

i f p o s s ib le ,

b e lie v e th a t t h i s p r o v is io n
c o u n tr y ,

is

th e n o te

s e c u r itie s

s e c u r itie s ,

r e q u ir e t w e n t y - f iv e p er c e n t in

a ffa ir b o f a fa ile d
and be p u t

in to

th e

in s titu tio n

th a t p u rp ose,
n o te h o ld e r
on e,

is

oomen t o t h e

a d ju stm e n t o f

I f a b a n k s h o u ld
th e

t o t a k e fr o m t h e

fir s t

th e

an d I b e l i e v e t h a t
as str o n g

s p e c ia l

a p o s itio n ,

t h a n i -fc woul d t o h ' v e c e r t a i n

I

s e c u r itie s

th is s e c tio n

ste p

a sse ts o f

p le d g e d s e c u r i t i e s .

fo r p le d g in g

in j u s t

am ount o f s u c h

th e hands o f a r e c e iv e r ,

and red eo m i t s

s e e no n e c e s s i t y

I t m a k es n o d i f f e r ­

o f b e n d s o r s e c u r i t y an d

n a t io n a l bank.

t h a t w i l l n a t u r a lly be ta k e n

as it

and d e p o s i t t h o s e

e x e d ss o f th e

B e c u r i t i e s ^3tt$^4a^iczzEdztzB^'when i t

fa il

p r a c tic a lly ,

f o r an e m e r g e n c y c i r c u l a t i o n .

e n c e w h e th e r y o u p u t up a n y c l a s s

th e

I

b e t t e r f o r th e banka o f th e

an d i n v o l v e s t h e sam e p r i n c i p l e ,

w ould, t o d e s i g n a t e c e r t a i n

is s u e d .

can
fo r

p la c e s th e

i f n ot a str o n g e r

s e c u r itie s

d e p o s ite d w ith

(%

t h e T r e a s u r y D e p a r t m e n t.

J^rem^the m e a s u r e s I h a v e s e e n

I do n o t r e c a l l a n y o f th em t h a t h a s a p r o v i s i o n
s e c u r itie s

s h a l l bo t h e o n ly s e c u r i t y

fo r th e n o te

a n d lik e th e p r e s e n t b o n d -se c u r e d n o te s T ta k e
be a f ir s t

lie n

on t h e

governm ent f a i l e d

to

th o s e s e c u r it ie s to
q u e n tly ,
s

k

r e a lis e

th e

sa fe ty

is

fu lly

as

sa fe ,

C o n se ­
i f not

y ou a r e m a k in g u c o mp a r i s o n- a o .

is s u e ,

c o m p a r in g i t
r

u n d er th e A ld r ic h b i l l .

i f th e

been p ro p o sed .

T hat i s ,

o f th is

is s u e d ,

t h e y w o u ld

in s titu tio n ,

redeem th e o u t s t a n d in g n o t e s .

th a n a n y th in g t h a t h a s

i,

it

su ch

e n o u g h m oney fr o m t h e s a } .e o f

I th in k t h i s p r o v is io n

Hr. M oK inney:
to

a s s e t s o f th e

th a t

w ith th e n o t e s




18
(L f

7j*. H a m ilt o n :
any m ea su re.

I 44^1, n o t make a n y p a r t i c u l a r r e f e r e n c e t o

I am s i m p l y s p e a k i n g o f t h e

s e g r e g a tin g o f

s p e c i a l s e c u r i t i e s a s s e c u r i t y f o r hank n o t e s .
M r. M cK in n ey:
h ill,

Tha

w as c o n t e m p l a t e d u n d e r t h e A l d r i c h

a s we u n d e r s t a n d i t .
Jftr. H a m ilt o n :

th er e.

Y es,

th a t

i s w hat h e c o n te m p la te d

I b e l i e v e t h a t t h i s p r o v is io n m akes i t

p ow er,

w it h o u t a n y e m b a r r a ssm e n t t o

th e

in s titu tio n s ,

i s s u e t h e s e n o t e s w i t h o u t b e i n g c o m p e ll e d t o
m arket and buy c e r t a in
le a s e

d e s ig ia te d

t im e s o f

s e c u r itie s ,

or perhaps
And b e s i d e s ,

em ergency, you a re n o t d e p r iv in g yo u r

& x

c u sto m e r s o f th e h e lp t h a t r i g h t f u l l y b e lo n g s t o
t o go i n t o

th e m arket and buy s e c u r i t i e s

Mnitosnii— itot—

Now, s e c t i o n 1 2 i s

th e m i n o r d e r

to be d e p o s ite d .

as to

r c tin m u v t-

m an n er i n w h ic h t h e s e n o t e s may b e r e t i r e d .
it

to

go i n t h e

th em o u t on a r e n t a l b a s i e ^ y a u 'r g p o m

ev en in

w ith in th e

It

th e

sa y s th a t

s h a l l b e d o n e b y t h e d e p o s i t o f l a w f u l m o n ey .
S e o tio n 1 3 i s

th e p r o v is io n

bank h a s o u t t h e f u l l l i m i t

k

la w ,

may r e t i r e

o a p ita l,

or th e

it

th a t

in

c a s e a. n a t i o n a l

o f c ir c u la tio n

down t o

under th e p r e s e n t

02 1 / 2 p e r c e n t o f t h e i r

am ount c o n t e m p l a t e d i n t h i s a o t a s t h e

minimum am ount o f b o n d - s e c u r e d c i r c u l a t i o n ,
t o th e p r e s e n t la w o f

w ith o u t r e f e r e n c e

0 9 * 0 0 0 ,0 0 0 p e r m o n th .

Now, i n c o n n e c t i o n w i t h t h i s m e a s u r e ,
y o u some f i g u r e s a.s t o how t h i s b i l l
it

I w is h t o

g iv e

w o u ld h a v e w o r k e d h ad

b een in o p e r a t io n d u r in g th e p a s t c r i s i s .
th e
g i v e n t o ^ o e n t r a l r e s e r v e c i t i e s o f New Y o r k ,

I t w o u ld h a v e
C h io a g o an d S t .

L o u i s , b a s e d u p o n t h e c a p i t a l show n b y t h e S e p te m b e r r e p o r t
o f t h e C o m p t r o ll e r o f t h e C u r r e n c y ,

s ix t y m illio n s o f o r e d it




n e tl is s u e .
;

I t w o u ld h a v e g i v e n

ta x e d n o te s ,

and t w e n t y m i l l i o n s o f t h e f i v e

I t w o u ld h a v e g i v e n
reserve

c itie s ,

0 2 6 ,3 6 4 ,0 0 0
th e

to th e o th e r r e se r v e

.,5 2 ,7 2 9 ,0 0 0

c itie s ,

not c e n tr a l
an d

I t w o u ld h a v e g i v e n t o

or th e banks r e q u ir e d t o

per cen t r e se r v e ,

$ 6 5 ,0 0 0 ,0 0 0

o f t h e lo w

per cen t n o te s .

o f lo w ta x e d n o t e s ,

o f fiv e per cent n o te s.

6178 c o u n tr y b a n k s,

fifte e n

f o r t y m illio n B

carry a

$ 1 3 1 ,0 0 0 ,0 0 0 lo w ta x e d n o t e s ,

o f f iv e per cen t n o te s.

and

I t w o u ld h a v e g i v e n

to

a l l th e n a t io n a l b a r k s o f t h e c o u n tr y $ 2 2 4 ,0 0 0 ,0 0 0 o f t h e
lo w t a x e d n o t e s ,

and $ 1 1 2 , 0 0 0 , 0 0 0 o f f i v e p e r c e n t n o t e s .

I t w o u ld h a v e g i v e n + o t h e
b o t h k i n d s j$

o f c r e d it n o te s ,

tm

th a t a ro se;

c o u n tr y b a n k s ^ 1 9 6 ,5 7 6 ,0 0 0 o f

or i t

t o h a v e m et t h e

w o u ld h a v e g i v e n t o a l l

c o n d itio n s

th e n a tio n a l

b an k s $ 3 3 6 ,1 6 9 ,0 0 0 .
I a ls o have th e f ig u r e s h ere
to

e a c h S t a t e ..

—

an d t o

s h o w in g w h at i t

O f c o u r s e y o u do n o t c a r e t o h a v e t h a t r e a d ,

each r e se r v e c i t y .

Mr. H a y e s :

I w o u ld l i k e

H r. H a m ilto n :
h r . H ayes:

to have th e

Do y o u mean i n

fig u r e s ,

an y p a r t i c u l a r

m y s e lf.
sta te ?

C a lifo r n ia .

Mr. H a m ilto n :

C a lifo r n ia ,

it

w o u ld g i v e $ 1 1 , 1 7 3 , 8 4 3 ;

Hr* H a y e s :

And Hew Y ork C it y ?

M r. H a m ilto n :

New Y ork C i t y ,

$ 4 2 ,9 6 7 ,0 0 0 .
a6 t o

w o u ld g i v e

I t w o u ld h a v e g i v e n

it

C h ic a g o $ 1 0 , 3 6 8 , 0 0 0 .

th e c lo a r in g h o u se c e r t i f i c a t e s ,

illu s tr a tio n

o f th e c r e d it

C h io a g o a u t h o r i s e d ,
m illio n s .

w o u ld h a v e g i v e n

4ttttp

Now,

th e r e 1 b a good

ou rren oy p r o p o s itio n ,

I t h i n k jfct=±eap an i s s u e

in

a w ay.

o f fo u r te e n

T h e y p u t o u t s o m e t h in g o v e r e l e v e n m i l l i o n .

T h i s b i l l w o u ld h a v e p r o v i d e d f o r
m ig h t h a v e i s s u e d . ,

so i t

$ 1 0 ,3 6 8 ,0 0 0 t h a t

w as p r e t t y

th e y

c l o s e t o w h at t h e y d i d




Sf

do.
Mir. M cC rea ry :

Y/hat w o u ld P h i l a d e l p h i a h a v e g i v o n ,

in P e n n s y lv a n ia ?
H r. H a m ilt o n :

P h ila d e lp h ia ?

,Tr . M cC rea ry :

Y ea.

H r. H a m ilt o n :

0 8 ,3 5 9 ,0 0 0 .

P i t t s b u r g w o u ld h a v e g i v e n

$ 1 0 ,9 1 2 ,0 0 0 .
H r. ? tc K in n e y :

T h e y i s s u e d l a r g e l y m ore th a n t h a t o f

c le a r in g h ou se c e r t if ic a t e s ?
Mr. H a m ilt o n :

Y es.

H r. M cC rearw :

V 'it
Th

w o u ld t h e h i l l h a v e g i v e n them ?

H r. H a m ilt o n :

T h is

is

w hat

h i l l w o u ld h a v e g i v e n

th e m .
Mr. M c C rea r y .
h ou se c e r t i f i c a t e s

zhe

c le a r in g

l)o y o u know h ow m uch t h e c l e a r i n g h o u s e

o f P i t t s b u r g and P h i l a d e l p h i a a m o u n ted t o ?

Mr. H a m ilt o n :

I have n et th o se

r.
I s s u e d $ 4 2 ,1 6 2 ,0 0 0
fo r a l l th e s t a t e s ,
th a t

I t h o u g h t t h a t V7as

th a t you r e fe r r e d t o .

Mr, M oH enry:
c e r tific a te s

Oh,

C ta te o f P e n n s y lv a n ia c o u ld h a v e
in

I have th e f ig u r e s h ere

and a l s o

th e r e s e r v e

c itie s .

H ave y o u c o p i e s o f t h a t ?

Mr. H a m ilt o n :
Mr. G i l l e s p i e :
H r. H a m ilt o n :
H r. H a y e s :

c r e d i t not o s .

g i v i n g t h e n u fcb er o f h a n k s , an d t h e am ount

s h o u ld h e i s s u e d ,
Mr. H a y e s :

f ig u r e s ._ j >

I oan f u r n is h c o p ie s o f a l l t h e s e

fig u r e s .

T hat can he p r in t e d w ith y o u r rem a rk s.
Y es.

Y e s ; we w an t t h o s e .

(T he s t a t e m e n t a b o v e r e f e r r e d t o w i l l h e fo u n d a t t h e
end o f Mr. H a m ilt o n * s r e m a r k s .)




fC

21

Mr. H a m ilt o n :
o f d iffe r e n t
r a is e d

Nov/, a p p l y i n g t h o s e

c h a r a c te r s.

The o f i t i c i s m

a s to th e a d v is a b ilit y

-fig u r e s t o

banks

h as been fr e q u e n tly

o f p e r m ittin g th e

s m a ll i n s t i -

/

tu tio n s to

is s u e th e se n o te s ,

in s titu tio n s ,
c r itic is m

th e

in

sa fe ty

c o m p a r is o n w i t h t h e c i t y

of it,

etc.

A n o th e r

|l|*f ('Mil i .11
*

h a s b e e n m ade t h a t p e o p l e m ig h t go i n t o

s y s t e m -r ^ r -* h - r p*irpn^-j
p r iv ile g e s .

th is

th e n o t e - is s u in g

n f

T h ose c r i t i c i s m s

r e a lly

T he f i g u r e s w i l l n o t b e a r th em o u t .
a bank w it h a c a p i t a l o f $ 2 5 ,0 0 0 ,

am ount t o n o t h i n g .
fo r

ta k e

in s ta n c e ,

w h ic h i s

t h e minimum

a m o u n t.
T h ey c o u l d i s s u e $ 9 , 3 7 5 .
T h a t i s t h e t o t a l am ount
th a t an
«••#«(*!« . I P l i .
<' U »•
i n s t i t u t i o n o f th a t, k i n d c a n i s s u e u n d e r
t h i s m ea su re.

A b a n k w i t h a o a o i t a l o f $ 5 0 ,0 0 0

a t o t a l o f $ 1 8 ,7 5 0 .

can is s u e

A b an k w i t h a c a p i t a l o f $ 1 0 0 ,0 0 0 c a n

jL
i s s u e $ 3 7 ,5 0 0 .
th e r e

is

Now,

T m ake th±s^ c l a i m

abundant s e c u r it y back o f i t

■h e y w i n
t

c a r e f u l l y ^o o n p i i .e r i t ' .

a n a t i o n a l bank w ith a c a p i t a l

fo r t h is b i l l ,
tc

s a tis fy

th a t

anyone i f

U n d er o u r p r e s e n t b a n k la v /

o f $ 1 0 0 ,0 0 0 c a n t a k e o u t

Jt
$ 1 0 0 ,0 0 0

in n o te

is s u e ,

and a l l

th a t

i s r e q u ir e d

o f th^m , i s

c­

to

d e p o s it

D e p a r t m e n t,

f i v e p e r c e n t r e d e m p t io n fu n d w i t h
o r $ 1 0 0 ,0 0 0 i n b o n d s ,

M r. G r i l l e s p i e :
H r . H a m ilt o n :

And t h a t
And t h a t

is
is

U n d er t h e p l a n we h a v e p r o p o s e d ,

and $ 5 , 0 0 0

th e T rea su ry
in

cash .

a p art o f th e ir r e se r v e .
a p art o f th e ir

reserve.

b e f o r e c r e d i t n o t e s ca n b e

i s s u e d a b a n k m u st h a v e a f u l l y p a i d - u p c a p i t a l ,
boon in b u s in e s s a y e a r ,
equal to

In o th e r w ord s,

in c r e a s in g th e o a p it a l c f th e

t v /e n t y p e r c e n t b e f o r e

le g e .

and m u st h a v e a c q u i r e d a s u r p l u s

t w e n t y p e r c e n t o f -the c a p i t a l .

we a r e v i r t u a l l y

m u st h a v e

in s titu tio n

ca n h a v e t h i s n o t e - i s s u i n g p r i v i ­




22

M cK in n ey:
In c e l e e t i n g t h a t tw e n ty p e r c e n t , i s
th e
t h a t b a s e d on n p r o v i s i o n t h a t now p r e v a i l s t h a t no n a t i o n a l
Vt *

b a n k ca n p a y d i v i d e n d s on i t s

sto c k u n t il

it

h a s a c c u m u la t e d

a r e s e r v e o f tw e n ty p e r ce n t?
H r. H a m ilt o n :
to

W e l l , we p r o v i d e d t h a t w i t h o u t r e f e r e n c e

th e p r e s e n t la w .
N r . M cC rea ry :

T hat i s

N r . H a m ilt o n :

r 'e made t h a t p r o v i s i o n w i t h o u t r e f e r e n c e

to th a t.

t h e r e q u i r e m e n t , y o u k now .

T h a t w a s d o n e t o p r e v e n t a n y o n e fr o m g o i n g i n t o

th e b u s in e s s fo r th e p u rp ose o f n o te
T'r» G i l l e s p i e :

is s u in g .

W ould t h a t t w e n t y p e r c e n t p r o v i s i o n

c u t o u t many b a n k s i n t h e s o u t h a n d w e s t ?
H r . H a m ilt o n :
v e r y fe w .

I th in k n o t .

I th in k

it

w o u ld c u t o u t

I h a v e no m ean s o f k n o w in g wh a t a fr o h a t w o u ld b e ,

w ith o u t a good d e a l o f w ork.

T h e y m u st h a v e b e e n i n t a o n

b u s i n e s s a y e a r \in d e r t h i s m e a s u r e .
T he A c t i n g C h a irm a n ;

I w o u ld l i k e

to

Do y o u k new how m uch g o l d w as im p o r t e d i n t o
am t r y i n g t o

fin d

H r. H a y e s :

it

here,

but i t

$ 1 1 0 ,0 0 0 ,0 0 0 .

T he A o t i n g C h airm an :

is

a sk one q u e s t io n .
th is

c o u n tr y ?

I

a l l m ix e d u p .

You mean d u r i n g t h e p a n ic ?

Y es.
.

M r. H a y e s :

One h u n d r e d an d t e n m i l l i o n .

T he A o t i n g C h a irm a n :

th e
Nov;, do y o u know how m uch b a n k

n o te c i r c u l a t i o n / b a se d upon b o n d s w as in c r e a s e d d u r in g th a t
tim e ?

Hr. H a m ilt o n :
b u t t h e b an k n o t e

I h a v e n o t any m ea n s o f k n o w in g e x a c t l y ,
i s s u e o f S e p te m b e r w a s $ 5 5 1 , 9 4 9 , 0 0 0 .

H r, C r a w fo r d :

The e x p o r t o f g o ld w a s c o n s i d e r a b l e .

Mr. H a m ilto n :

And t h e n o t e

I s s u e cf=® eeeubu.i

83,

as




23

show n "by t h e r e p o r t o f D ecem b er 2 3 , w as $ 6 0 1 , 8 0 5 , 9 8 5 ,
H r. H a y e s :

A bout s i x h u n d r e d m i l l i o n

H a m ilt o n :
$ 6 0 1 ,8 0 5 ,0 0 0

It

M r .H a y e s :

S e p te m b e r ,

an d

An i n c r e a s e o f ^ 5 0 , 0 0 0 , 0 0 0 .

H o, o v e r

M cK in n ey:

N o;

H r . H a m ilt o n :
$ 5 5 1 ,9 4 9 ,4 6 1 .
it

w as $ 5 5 1 , 9 4 9 , 0 0 0 i n

i n T>eoember.

Hr* ?rc K in n o y :

IS r,

b e fo r e - —

$ 1 0 0 ,0 0 0 ,0 0 0 .

fifty

m illio n .

T he r e p o r t

f o r S e p te m b e r g i v e s

You c a n ta k e t h a t l a s t

r e p o r t,

it

as

an d f i g u r e

very r e a d ily .
H r. F a y e s :

’F ia t w a s t h e f i g u r e

g iv e n

in th e r e p o r t o f

D eoem b er 23?
Mr. H a m ilt o n :

Sir.

H ayes:

Oh, y e s ,

H r . H a m ilt o n :
I p r e su m e i t

is

$601J0 0 0 ,000.
it

is

$ 5 0 ,0 0 0 ,0 0 0 .

I t w as ab o u t $ 5 0 ,0 0 0 ,0 0 0 a t t h a t tim e .

g r e a t e r now .

T he A c t i n g C h airm an :
T.hat I w as g e t t i n g a t w a s t o s e e
th e
how much v o lu m e h a d b e e n a d d e d t o b y g o ld i m p o r t a t i o n , an d
by th e

in c r e a s e o f c ir c u la t io n

H r. H a y e s :

b a s e d upon b e n d s .

T h e r e w a s som e g o l d e x p o r t a t i o n ,

th o u g h ,

I

su p p ose.
Mr. M cK in n ey:

Y es;

I

su p p ose s o .

Mr. H a m ilto n :

T h e s e a r c t h e o n l y f i g u r e s I h a v e on t h e

su b j o c t .
The A c t i n g C h airm an :
th a t,

M r. H i l l h a s j u s t

s u g g e s t e d t o me

b a s e d upon t h e b o n d - s e c u r e d c i r c u l a t i o n ,

d u r in g th e f i n a n c i a l t r o u b l e ,
sh ort o f

and g o l d in q o o r tf

t h e am ount w i l l b e a t r i f l e

$ 2 0 0 ,0 0 0 ,0 0 0 .

M r. H i l l :

And t h e n a t i o n a l b a n k c i r c u l a t i o n

■

o u ts ta n d in g

m




on t h e

fir s t

d a y o f J a n u a r y w as § 6 9 0 , 0 0 0 , 0 0 0

Mr. H a m ilt o n :

T h a t m a k es i t

The A c t i n g C h airm an :
F ebruary you w i l l
? ir . H i l l :

fin d

§ 1 4 0 ,0 0 0 ,0 0 0 .

And t a k i n g i t

on t h e

i t m ore t h a n t h a t ,

fir s t

of

I th in k .

I th in k n o t .

Hr. H a m ilt o n :
§ 1 4 0 ,0 0 0 ,0 0 0 in

T hat i s

an in c r e a s e o f a p p r o x im a te ly

t h e n a t i o n a l bank c i r c u l a t i o n .

The A c t i n g C h airm an :

Ho y o u mean on t o p o f y o u r

o n e h u n d r e d and t e n m i l l i o n s o f g o ld ?
H r, H a m ilt o n :

Y es*

T he A c t i n g C h airm an :

Ho;

if

t h e r e w ere § 1 1 0 ,0 0 0 ,0 0 0 o f

ii

se n te d

t h e r e sh o w s i t

,

^<

He

t o b e a b o u t § 1 2 0 ,0 0 0 ^ 0 0 0 , m ore

s a i d § 6 9 0 ,0 0 0 ,0 0 0 .
The A o t i n g C h airm an :
c ir c u la tio n .
g o ld

T hat i s

T hat i s

b a s e d u p on t h e b an k

th e bank c i r c u l a t i o n .

T hat i s

n ot th e

im p o r ta tio n a t a l l .
Mr. H i l l :

I t h a d n o t h i n g t o do w i t h i t

Mr. H a m ilt o n :
M r, H a y e s :

But th a t

T hat i s

Mr. H a m ilt o n :

Y es;

an i n c r e a s e

§ 1 4 0 ,0 0 0 ,0 0 0 .

The A o t i n g C h airm an :
b een § 3 3 6 ,0 0 0 ,0 0 0 is s u e d

is

at a ll.
o f § 1 4 0 ,0 0 0 ,0 0 0 .

T hat i s

O f c o u r s e y o u m ean,
in t h a t
it

e x tr a o r d in a r y
if

th e r e had

tim e ?

w o u ld h a v e p r e v e n t e d t h i s

con­

d itio n .
The A c t i n g C h airm an :

And n o t w a i t u n t i l a

Mr. H a m ilt o n :

T he s e c x i r i t y b a c k o f t h e n o t e s

t

is s u e d ,

if

Y es.

tim e .

o u r p l a n w a s a l a w , w o u ld b e a s f o l l o w s .

a b a n k w i t h a c a p i t a l o f § 1 0 0 ,0 0 0 a s t h e b a s i s t o
t h e y w o u ld h a v e § 6 2 ,5 0 0 i n b o n d - s e c u r e d n o t e s ,

T a k in g

f i g u r e u pon

or in

govern-




( 0
q

3b

m ent b o n d s ,

T h ey w o u ld h a v e a f i v e

w i t h t h e T r e a s u r y D e p a r t m e n t,

p e r c e n t r e d e m p t io n fu n d

a m o u n tin g t o

p e r c e n t r e d e m p t io n f u n d | c r e d i t n o t e s ,
g u a r a n t e e fu n d c r e d i t n o t e ,
^ le g a l reserv e
you have
th a t

th e a s s e t

per cent

in v e n te d

general a sset

a fiv e

an d a f i v e p e r c e n t

e a c h a m o u n tin g t o vl , 3 7 5 ;

fu n d r e q u i r e d t o b e c a r r i e d w o u ld b e § 5 , 6 2 5 ;

37 l / 2

is not

135;

o f c a p it a l o f th e

in governm en t b o n d s,

b u t ita i s

o f t h e b a n k in g i n s t i t u t i o n ,

o f y o u r bank t o t h a t

in s titu tio n
a

w h ic h s t r e n g t h e n s

e x te n t; you have a ls o th e

t w e n t y p e r c e n t o f s u r p l u s r e q u i r e d , w h ic h w o u ld i n c r e a s e
th e a s s e t s

§ 2 0 ,0 0 0

have evorv r ig h t

in t h a t

c o n n e c tio n ,

to c o n s id e r

I ta k e

t h i s p o r tio n

it

t h a t we

o f th e c a p it a l

an d t h i ' s s u r p l u s a s t h a t m uch a d d i t i o n a l s e c u r i t y

in

comparing

t h e p r e s e n t b a n k in g la w v / i t h t h e o n e we c o n t e m p l a t e .
o t h e r w o r d s , t h a t w o u ld g i v e u s (‘ 1 3 2 ,5 0 0
>
t o m e t $ 1 0 5 ,0 0 0
TTow, a s t o
in s titu tio n s ,

In

in s e c u r i t i e s

in o b l i g a t i o n s .
th e

s e c u r it y back o f th e

s m a l l e r b a n k in g

t h e c o u n t r y b a n k in g i n s t i t u t i o n s ,

s p e c i a l in q u ir y a s to th e

c o u n t r y b a n k s,

I h a v e made

and I f i n d t h a t t h e

average r e s p o n s ib ility

o f t h e s t o c k h o l d e r s o f fejfu b a n k s w i t h

c a p i t a l o f $ 2 5 ,0 0 0 ,

u p w a rd s o f § 5 5 0 ,0 0 0 ,

own, g e n e r a l l y
3300 a c r e s to

s p e a k in g ,

I

In I l l i n o i s ,

Mr. H a m ilto n :

in f o r m a t io n ?

sen t a s p e c ia l le t t e r 1 to

and h a d th em f i l l

M r. W eek s:

Cox:

on an a v e r a g e o f

How d i d y o u g e t a t t h a t

Mr. H a m ilt o n :

Mr.

in r e a l e s t a t e ,

and t h a t t h e y

each in s t it u t io n .

?!r» W eek s:

in d iv id u a lly ,

is

I sen t

it

it

th e

banks

o u t.

do y o u mean?
a l l o v e r th e U n it o d S t a t e s .

T h e s e t a b l e s H r . H a m ilto n p r e p a r e d , h i m s e l f ,




26

c e r t a i n l y t h r e e m o n th s a g o .
I5r. P u j o :

How d i d t h e y

: ! r . H a m ilt o n :

get th a t

I s im p ly s e n t

h a n k s a s k i n g th e m t o

re a l e sta te ?

a c ir c u la r l e t t e r

f u r n i s h me w i t h t h a t

to th e s e

in fo r m a tio n

in

a g e n e r a l w ay.
It .

P u jc :

The a v e r a g e h an k y o u s a y ow ned how much?

h r* H a m ilt o n :
jar, P u j o :

3300 a c r e s .

ji^tehs o f t h e

H r. H a m ilt o n :

E a c h o f t h e lim i r m I

:;,2 5 ,0 0 0 c a p i t a l .
go a h e a d o f i t ,

but

."'r. P u j o :

c o u n t r y b a n k s?

T hat i s ,

c o u n tr y banks

on an a v e r a g e .

Pome w o u ld

v e r y fe w u n d er i t .

T h ey sh o w ,

th e y a re o n ly p e r m itte d t o

th e n ,

e v id e n t ly had lo a n s ,

a c q u ir e r e a l e s t a t e

in

b ecau se

c o n n e c tio n

w it h a had lo a n .
I 'r . H a m ilt o n :

Do n o t m i s u n d e r s t a n d m e.

th e r e a l

e sta te

ow ned b y t h e

ord er to

get at

th e r e s p o n s i b i l i t y

s e c u r ity

to th e n o te - h o ld e r ,

h r . P u jo :

in d iv id u a l s to c k h o ld e r s ,
o f th e

in s titu tio n

D id t h e y f u r n i s h y o u w i t h t h e l e g a l

as to

in
an d t h e

in c o n tin u e d l i a b i l i t y .

o f ea ch s to c k h o ld e r in th o s e b an k s,
o f h is S ta te ,

T h is is /s im p ly

e x e m p t io n s

u n d er th e h o m e ste a d la w s

w h e th e r o r n o t t h i s

r e a l e s t a t e w as p a r t

o f h i s h o m e s te a d ?
h r . H a m ilto n :

Oh, n o .

I t 'was s i m p l y g e n e r a l in f o r m a ­

t i o n t h a t t h e y f u r n i s h e d me i n t h a t
h r . W eek s:

c o n n e c tio n .

D id y o u a s k w h e t h e r t h a t r e a l e s t a t e w as

en c u m b e r e d o r n o t ?
ITr. H a m ilt o n :
b ility

o f th e ir

hov/ w get
e
tution.

th e

I a s k e d th em w h a t t h e

in d iv id u a l r e s p o n s i­

s t o c k h o ld e r s w as ab ove l i a b i l i t y ,
f i g u r e o f u p w a rd s

of 035®,000 to

and t h a t

th e

in s ti­

is




27

H r. P u jo :

Y our b i l l

c o n te m p la te s a g u a r a n te e in g o f

clopoa i t s ?
Mr. H a m ilto n :
M r. P u j o :

N o,

Do y o u b e l i e v e

M r. H a m ilto n :
M r. H a y e s :

is

My c b j e o t i o n

th a t I b e lie v e

th e ir

t o th e g u a r a n te e in g o f

t h e b a n k in g s y s t e m o f t h i s
b u i l d i n g up o f c a p i t a l an d

s u r p lu s o f y o u r i n s t i t u t i o n s .
in c lin e

g u a r a n te e d d e p o s it s ?

v / i l l y o u t o l l u s w hy, b r i e f l y ?

c o u n tr y s h o u ld e n c o u r a g e th e

w o u ld

in

I do n o t .

Mr. H a m ilt o n :
d e p o s its

it. d o e s n o t .

The g u a r a n t e e i n g o f d e p o s i t s

t h e m an agem en t o f t h e

in s titu tio n s

c a p i t a l a t t h e m inim um r e q u i r e d

to keep

in t h e d i f f e r e n t

c itie s .
H r. H a y e s :

.And p a y o u t a l l t h e i r

H r. H a m ilto n :
M r. P u j o :
to

And p a y o u t t h e i r

s u r p lu s

s u r p lu s in d iv id e n d s .

T h a t w o u ld b e an a d v a n t a g e t o

W e ll,

Mr. G i l l e s p i e :

th e p e o p le ,

sp en d .

g e t t h e i r m oney b a c k t o
M r. H a m ilto n :

in d iv id e n d s ?

th e y g et

it

i n t h e way o f l o a n s .

Y e s t e r d a y I h e a r d a g e n tle m a n o f a

g r e a t, d e a l o f p r o m in e n c e m ake a n o t h e r a n s w e r t o t h a t
He s a i d

t h a t ho d id n o t t h in k t h a t th e

b a n k s s h o u ld
c u sto m e r s,
to

be r e d u c e d ,

c a p ita liz a tio n

a r g u m e n t.
of

b e c a u s e t h e h ef rq ^ b a n k s h a d h e a y /

and u n d e r t h e

te n p e r c a n t l i m i t a t i o n

o f lo a n s

o n e c u s t o m e r , t h e y w o u ld h a v e t o h a v e a h e a v y c a p i t a l i z a ­

tio n .
Mr* H a m ilto n :

T h a t th r o w s an a d d i t i o n a l b u r d e n on t h o s e

J^r

vw v A *

la r g e r

in s titu tio n s o f

r e s p o n s ib ility

th e w eaker

%

or ir r e s p o n s ib le p a r t ie s ,
p a r tic u la r c la s s

an d i t

o f b a n k in g t o

e n c o u r a g e s e v e r y man i n t h a t

go o u t an d

a d v e r tis e

fo r

\




28

a c c o u n ts,

e t c .,* - an d h e—e*w ,

knov- t h e i n s t i t u t i o n
in s titu tio n

is

i s -ifJiady, an d t h e m an agem en t o f t h e

sh a d y ,

£**M ay:

" H ere,

h i ~ gest

in s titu tio n

y e t h e can

our i n s t i t u t i o n

o f t h e C o m m itte e ,
te e *

It

is

n o’
.y, and i f

is

ju st

a s good a s th e

to

go j u s t

a ste p

and p o s s i b l y f o r t h a t

on t h i s

b eca u se th e

our d e p o s it s * "

I w o u ld l i k e

my ov.n i n f o r m a t i o n ,

tat-, i o n

t

i n a c o m m e r c ia l c e n t e r ,

govern m en t in b a ck o f a l l
Hr* P u j o :

e v e n t h o u g h t h e p u b l i c may

q u e s tio n

fa r th e r fo r

o f som e m em bers

o f t h e G overn m en t g u a r a n ­

b e i n g a d v o c a t e d b y b o t h r e p u b l i c a n s and d e m o c r a t s
any su ch n a t t e r n ig h t

e v e r come t o

bo a p a r t i s a n

m a tte r --W eek s:

You mean by c o n e r e p u b l i c a n s and c o n e demo­

c r a t B.
• ? u jo :

V e il,

G overn m en t w e r e t o
m ig h t b e d e v i s e d

some o f b o t h ,

but not a l l .

if

th e

g u a r a n t e e t h e d e p o s i t s b y a n y sch em e t h a t

and e n a c t e d

i n t o l a w , w o u ld i t

not have

a t e n d e n c y t o h a v e a l l d e p o s i t o r s o f s a v i n g s b a n k s *T rfr t r u s t
T
c o m p a n ie s ,

-in ;S ta te b a n k s, t r a n s f e r

th e ir

d e p o s its to

th e n a tio n a l b a n k s, u n le s s

J fc

s im ila r p r o te c tio n w ere a ffo r d e d
,
"
i n s t i t u t i o n s t h a t I h a v e m e n tio n e d ?

'
th e v a r io u s S ta te
:r . H a m ilt o n :
r

I do n o t l o o k u pon t h a t w i t h t h e a la r m

t h a t m o st p e o p l e d o ,

in th a t

n a tio n a l b ank er, m y s e lf.
b ank er,

c o n n e c tio n .

How, T am n o t a
and
I am a S t a t e b a n k e r , a p r i v a t e

and I t h i n k t h a t fri w e l l e s t a b l i s h e d S t a t e

w e ll-e s ta b lis h e d

b a n k s/o f a n y k i n d

in s titu tio n s

h fll d Q J f h e r u

w

ill)

It! : e r h a p s some w i t h d r a w a l s ^ / bur. - n r c y ^ w l l l h o l d t h e b u l k o f
t h e ir b u s in e s s ,
th e S ta te

and i t

w o u ld l e a d t o t h i s ,

i n my m in d :

I n s t i t u t i o n s , p e r h a p s , m ig h t h a v e t o

T hat

o ffe r a l i t t l e




e x t r a in d u c e m e n t ,

o r s o m e t h in g o f t h a t k i n d ,

e q u iv a le n t to

w h a t w o u ld h e r e q u i r e d o f t h e n a t i o n a l i n s t i t u t i o n s ,
e s ta b lis h th is
to

th e ir

g u a r a n t y fu n d ;

cu sto m e r s,

we p r e f e r t o

a n d t h e y w o u ld d o i t ,

"You h a v e known u s f o r y e a r s ,

g iv e you th e b e n e f it

o f th is

to
s a y in g

e t c .,

and

r a t h e r th a n th e

F e d e r a l G o v e r n m e n t."

Mr. Pu,1 o :
encted

A s s u m in g now t h a t

in t o la w ,

le g is la tio n

s u c h a -plan s h o u l d h e

and t h a t t h e S t a t e l e g i s l a t u r e s w o u ld e n a c t

s im ila r to

th a t

e n a c te d by th e n a t io n a l governm ent

a ffo r d in g e v e ry p r o te c tio n a s to

g u a r a n ty ,

o t h e r m e th o d s o f s u p e r v i s i o n o f t h e
y o u not, b e l i e v e
th e

th a t

a ffa ir s

in s p e c tio n

an d

o f th e bank;

Do

-uhe a v e r a g e man w o u ld p r e f e r t o h a v e

g u a r a n t e e o f t h e U n i t e d S t a t e s G overn m en t b e h i n d h i s

d e p o s i t /At h a n t h a t o f a S t a t e ?

Mr. H a m ilt o n :

W e ll,

t h a t w o u ld it s i m p l y b e a g u e s s on

t h e p a r t o f t h e p a r t y a n s w e r in g .
Mi*• P jijo :
p r o te o t

Xs i t

n ot s o c ia lis m

a n y b o d y 's d e p o s i t ,

t o h a v e t h e G overn m en t

e ith e r S ta te or n a tio n a l,

in

b a n k s?
M r. H a m ilt o n :
Mr. P u j o :

H r. P u j o :

Is

to

it

Y es,

M r. M cK in n ey:
d e p o s ito r ,

I do n o t th in k

it

n ot s o c ia lis m ,

s o c ia lis m

or

is

or c e n tr a liz a tio n ?

p a te r n a lis m

I f you a s k th a t p r o te c tio n

why c a n y o u n o t e q u a l l y w e l l

go t o t h e G overn m en t t o
Mr. H a y e s :

h is b i ll s .
Y es.

p e r m it

fo r th e
th e b an k s

g u a r a n t e e t h e l e a n s t h e y m ake?

Or t h e m e r c h a n t ,

Mr. M cK in n ey:

good p o lic y .

to

g u a r a n te e h i s

a c c o u n ts,




ov

,
rWeek s:
V

T w o u ld l i k e

t io n w ith t h a t .

t.o a s k o n e q u e s t i o n

in

co n n ect?

Bo y o u t h i n k t h a t t h e r e c o r d o f b an k f a i l u r e s

u p t o t h i s t im e w o u ld b e a n y g u i d e t o f u r t h e r b a n k f a i l u r e s
in th e f u t u r e ,

if

o u c h a p o l i c y w e r e .ad op ted ?

F r . H a m ilt o n :
Fr

V eek s:

Bo y o u m ean t h e

Y es.

Mr. H a m ilt o n :
at a ll,

'g u a r a n t e e in g o f d e p o s i t s ?

I do n o t t h i n k y o u c o u l d b a s e i t

b e c a u s e I h a v e an i d e a t h a t

m any i n t o

o ffe r in g

w o u ld l e a d

in d u c e m e n t s ,

this w o u ld l e a d

etc.,

en d

a great

th e c o m p e titio n

t h e n i n t o u n s a f e b a n k in g .

I 'r . W eek s:
bank f a i l u r e s ,

You t h i n k i t

w o u ld i n c r e a s e t h e num ber o f

do y o u ?

h r . H a m ilt o n :
do t h a t .

upon t h a t

X mn

th in k

it

w o u ld h a v e a t

T h a t w o u ld b e my o p i n i o n .

J r , .M cK inney:

h,
.

l nif - | li i i n rH^ -

■ w .nt u n d e r

t

a s y s t e m w h e r e a l l b a n k d e p o s i t s w o re g u a r a n t e e d b y t h e
G o v ern m e n t,

or g u a r a n te e d by th e

c ith e r

s y s t e m , ^ w o u ld i t

titio n

b e tw e e n th e

u n i t e d b a n k s HW

n ot le a d to

som e m e th o d o f com pe­

i n d i v i d u a l b a n k s t h r o u g h w h ic h t h e b a n k

t h a t o f f e r e d t h e g r e a t e s t in d u c e m e n t w o u ld n a t u r a l l y
g r e a te r
t h e luiiMrtMBla am ount o f b u s i n e s s ?
F r . Han i l t o n :

I th in k

it

w o u ld ,

get

and I t h i n k t h a t

w h e r e in t h e d a n g e r l i e s . —*-

is

b a .n k er e

c / j-

'j

w o u ld a d o p t a p o l i c y

th a t c o n s e r v a tiv e

i n s t i t u t i o n * * w o u ld

n o t a d o p t*
Mr. M cK in n eys

And t h a t w o u ld bo t h e b a n k tlv * t w o u ld
A t*-

secu re

th e b u s i n e s s ,

Mr* H a m ilt o n :

b ecau se a l l

th e banks

b e h in d i t *

A l l t h e b a n k s w o u ld b e b e h in d i t ,

t h e y w o u ld u s e t h a t l e v e r a g e t o

^ et b u s in e s s *

and




31

jar. H a y e s :

And

Mr. M on en ry:

A re y o u i n f

Mr. H a m ilto n :
b an k s,
tio n

I am n o t

it,

get

to o .

v o r o f p o s t a l s a v i n g s b a n k s?

in fa v o r o f p o s t a l s a v in g s

no f a x a s a n y b i l l t h a t h a s b e e n b r o u g h t t o my a t t en~

is

con cern ed .

K r.
cent

w o u ld

th e y

G ille s p ie :

W ith t h e g o v e r n m e n t p a y i n g tw o p e r

on d e p o s i t s ?
H r. H a m ilto n :

It

is

not

p e r c e n t on d e p o s i t s t h a t

th e

I o b je c t

q u e s t i o n o f p a y i n g tw o
to ,

but

it

i s th e p r in c ip le

AJtu>

I n v o lv e d

i n t h o s e m e a s u r e s , w h e r e i t - ^ n y l ■■? ; t h a t
■><

a ll

su ch

d e p o s i t s mnja m ade w i t h p o s t a l s a v i n g s b a n k s a r e n o t
s u b je c t to any l e g a l p r o c e s s ,
ta x a tio n .
and i t

T h at i s

w o u ld ,

an d a r e n o t

a v ery d angerous fe a tu r e fo r

to esca p e ta x a tio n ,

p e r c e n t o f b u s i n e s s aw ay fr o m t h o s e
th e p r in c ip a l o b je c tio n to

/J iu .

Of co u rse th e

'fyrv'-tLo

is ,

ta k e a la r g e

in s titu tio n s .

T hat i s

t h e m e a s u r e s t h a t h a v e come t o
in v e s tm e n t o f th e fu n d s

but th e

are o b j e c t io n a b le to th e

in

s m a lle r

a r e a ta * d an ger^ in t h e p o s t a l s a v in g s bank

m e a s u r e s t h a t * id h a v e -guer^ i s
th a t

is

o f m u n i c i p a l i t i e s o f 2 0 ,0 0 0 and u p w a r d s ,

en d t h i n g s o f t h a t k i n d ,
p la c e s ;

th e c o u n tr y ,

in th e s m a lle r i n s t i t u t i o n s w here t h e r e

a t e n d e n c y in l o c a l i t i e s

my n o t i o e .

su b ject to

a lo n g th e l i n e s

fa r as th e b i l l s

I have s t a t e d - -

t h a t h a v e come t o my n o t i c e

are concerned.
Mr# M|a H a y e s :
c h a r a c t e r o f w h at i s

You a r e f a m i l i a r w i t h t h e g e n e r a l
c a lle d

th e A ld r ic h b i l l ,

I su p p ose.

TTha

do y o u t h i n k a b o u t t h e b o n d - s e c u r e d c i r c u l a t i o n p r o v i d e d f o r
b y Glia tv

r^o -ftn v i a ln o u o g c d i t — b u t n et- h e r e . -

Mr. H a m ilto n :

T he d i f f i c u l t y

in a n s w e r in g y o u r q u e s t io n




32

.in t h a t c o n n e c t i o n 1 b t h a t I do n o t know w h ic h e d i t i o n y o u
r e fe r to .

You ;joe t h e y a r e g e t t i n g oul a new am endm ent

every day,

a lm o s t ♦

i f y o u W oks o c c a s i o n

o b j e c t io n w as t h a t
in p r o p o r t io n

to

it

I w ac v e r / much

m m

and I g u e s s y o u a l l r e c e i v e d

o p p osed t o ,
fr o m m e,

T he o r i g i n a l h i l l

to lo o k

it

a c ir c u la r le tte r
u

l i m i ds x l t o -a c o m p a r a t i v e l y fe w c i t i e s

t h e num ber

in t h e U n ite d S t a t e s ,

bonds t h a t w e m a c c e p t a b le f o r t h a t p u r p o se ;
th a t

232,

o r s o n o t h i n g o f t h a t k in d —

in t h e S t a t e

of I llin o is

m e n t.

on J a n u a r y fta 3 0 t h ,

P erhaps you have not
M r. H a m ilt o n :

to c r i t i c i z e

Mr. H a y e s :

1908,

seen

L e t me a s k y o u t h i s

it?

an d e v e r y t h i n g ,

Mr* H a m ilto n :

v a lu a tio n

q u e s tio n ,

nn amend­

X do n o t w a n t

in a l i t t l e

to g e t y o u r o p in io n

I mean t o

on i t .

th e ir

s ia e ,

su p p o se a l l
sch ool

in t h e

in te r e s t.

I t h i n k t h e r e s h o u ld b e som e a d d i t i o n a l

in e x c e s s

o f th a t.

7 o r in s ta n c e ,

t o th e b ond ed in d e b te d n e s s in
o f th e

sa y ,

c o u ld be a c c e p te d f o r c i r c u l a t i o n ,

p r o v i d e d t h e y h a d n o t pafc d e f a u l t e d

be a lim it

th e b i l l w ith

t h o s e r e q u i r e m e n t s w e r e w ip e d aw ay; w h a t t h e n

m u n i c i p a l i t i e s w ith o u t r e f e r e n c e t o

r e q u ir e m e n t

T e n a to r A ld r ic h h a s

f o r I do n o t know a n y t h i n g a b o u t i t .

w o u ld y o u e a y i n r e g a r d t o

d is tr ic ts ,

T know it, w as t w e l v e

it.

d i f f e r e n t w a y , b e c a u s e I w o u ld l i k e
S u p p o se f i l l

an d I b e l i e v e

I h a v e not. s e e n t h a t b i l l .

th a t b i l l ,

t h a t -h a d

—

MwmTJttptmnffl: The A c t i n g C h a irm a n :
r e p o r te d ,

that —

p

c a .ir r iu n itie n ,

etc.

th e r e

s h o u ld

p r o p o r tio n t o

th e

T h e r e s h o u l d b e s o m e t h in g

o f t h a t k in d .
Mr.
th a t

dryeo:

^ ven w ith

so r t o f cu rren cy?

th a t,

" h a t w o u ld y o u s a y a b o u t




\

Mr. H a m ilto n :

e ffe c tiv e

You moan a s t o w h e t h e r I t w o u ld b e

o r n o t?

Mr. H a y e s :

Y es.

Mr. K s n iilt o n :
or a b i l l

I do n o t b r ie v e th a t

a lo n g th e l i n e

th a t

m ea n s o f p r e v e n t i n g p a n i c s *

It

c o n t e m i J la t e s , w o u ld b e t h e

I b e lie v e

g o o d ,s a f e y se c u r e c u r r e n c y t h a t

th e A ld r ic h b i l l *

it

w o u ld g i v e u s a

c o u ld c i r c u l a t e ,

t h a t u n d e r a n y p r o v i s i o n th a t.. I h a v e s e e n o f i t

b ut I th in k
y et,

it

w o u ld be t o o l e n g t h y an d cu m b ersom e t o d o much g o o d ,
t h e put. i e n t w o u ld b e in a h e l p l e s s
ja r .

H a y es:

c o n d itio n .

In e t h e r w o r d s , y o u t h i n k t h e h o u s e v /o u ld

b e b u rn ed b e f o r e y o u c o u ld g e t th e
Mr.

H a m ilt o n :

Mr.

G la s s :

A ld r ic h

b ill,

fir e

R i g h t on t h a t p o i n t , do y o u
ev en in a

c ir c u la tio n

th e b a n k s o f th e

th e

A re n o t a l l t h e

s o u th and

o f th e b a n k s in th e

an d i n t e r i o r b a n k s , up t o

now?

th in k

t im e o f e m e r g e n c y , w o u ld a f f o r d

In o t h e r w o r d s ,a a r e n o t m ost

s o u th and w e s t ,

e n g i n e o u t?

Y es.

a n y g r e a t am ount o f r e l i e f t o
th e w est?

b e fo r e

th e ir lim it

s m a l l b a n k s tip t o

cn

th e ir

l i m i t on c i r c u l a t i o n ?
Ir.

H a m ilt o n :

I th in k n o t,

a ll

o f th e n ; b u t o f c o u r s e

t h e r e p o r t s o f t h e C o m p t r o lle r show t h a t up t o
o f th in

tr o u b le th e y had ab ou t s i x t y

Mr.

G la s s :

Mr.

H a m ilto n :

Mr» G l a s s :

th e b e g in n in g

p er ce n t.

A l l t h e b a n k s?
Y e s, o u ts ta n d in g .

B u t I m ean t h e b a n k s o f t h e

s o u t h an d t h e

w e s t*
Mr. H a m ilt o n :

a s to th e

c o u l d n o t t e l l y o u w h a t th u f i g u r e

s m a lle r
is ,

in s titu tio n s

I

b e c a u s e I do n o t know




WTI

B ut v/e h a v e p r o v i d e d

in t h i n m ea su re

we a r e p r e s e n t i n g

h o re th a t th e y can red u ce th e c ir c u la t io n
p er cent

o f th e ir

em ergen cy in s u p ,

c a p ita l,

H ere i s

s o m e t h in g t h a t I w o u ld l i k e

to

S u p p o se you c o u ld o p e r a te

f i v e m i n u t e s , an d y o u h a d a c u r r e n c y f a m in e i n ^

and y o u c o u l d n o t b o r r o w s e c u r i t i e s ,
b u y th e m .

l/2

and a v a i l t h e m s e lv e s o f t h i s

know a b o u t t h e A l d r i c h b i l l .
in

62

i f t h e y w i s h t o do s o .

Mr* Weemai

under i t

down t o

How w o u ld i t

f a r a s t h a t bank i s

r e lie v e

and h a d t o

t h e c u r r e n c y fa m in e ,

as

concerned?

! ' r . H a m ilt o n :

Ve l l ,
T

th a t

hank o J" c o u r s e w o u ld b e a s

h e l p le s s under th o s e c o n d itio n s a s th ^ r a re u n d er th e
'AA/hs*\

p resen t

c o n d itio n ^

r e lie v e

th e m s e lv e s .

Mr# H a y e s :

in

I t w o u ld t a k e

Mr. H a m ilt o n :
in s titu tio n s to

to

Y es.

ca rry th e

Mr# H a y e s :

s e c u r e governm ent b on d s t o

g o o d m on ey t o

do i t .

I do n o r b e l i e v e y o u c a n e x p e c t
c la s s

o f s e c u r i t i e s t o bo p u t u p .

You c o u l d n o t e x p e c t th em i n t h e w e s t t o

do

it.
.Yr. W eek s:
Bo y o u t h i n k t h a t
to buy,

Ik) y o u t h i n k t h e y o u g h t t o do i t ,
is

sn yw av?

> art o f t h e b u s i n e s s o f a n a t i o n a l b a n k ,

own an d c a r r y s e c u r i t i e s ?

r J U '^
?*T* H a m ilt o n :

I th in k

th e y

be l i m i t e d

in w h a t

th e y do in th a t r e s p e o t.
T he A c t i n g C h airraan :
u nder th e p r o v is io n s
e x te n t,

o f th e

In o r d e r t o a v a i l t h e r i p e l v e s ,
* ld r ic h b i l l ,

t o th e

fu ll

J:* 11»I ' u

w o u ld t h e y n o t h a v e t o p u r e h a s e b ondp o f t h e k in d

m e n t io n e d i n h i e b i l l ,
a p a n ic had

t o th e e x te n t

com e u pon th... p e o p l e ?

o f * 5 0 0 ,0 0 0 ,0 0 0 ,

b e fo r e




0

35

H r . H a m ilt o n :

To t h e e x t e n t o f # 5 0 0 , 0 0 0 , 0 0 0 ;

T he A c t i n g C h airm an !

T han t o

y es.

'chat e x t a n t ,
/

5/

0 5 0 0 , 0 0 0 , 0 0 0 o f t h e m on ey o f t h e h a n k / if? t i e d
I.Ir • H a m ilt o n !
Oh e A c t i n g

up,

is

it

n o t?

Y es*

C h airm an :

T hen w hen t h e t r o u b l e

cajrie,

if

t h e y w o n te d t o i s s u e c u r r e n c y u p o n t h a t # 5 0 0 , 0 0 0 , 0 0 0 , t h e y
c o l d o n ly i s s u e c u r r e n c y on p a r t o f i t , t o t h e e x t e n t o f
4B& 75 c e n t s on t h e h u n d r e d ;
be t i e d

up,M t e fawm when i t

M r. H a m ilt o n ;

o u g h t t o ho l e t

up i n t h a t

Issu e d t o th e

And t h e b a l a n c e o f t h e m on ey t h a t

k in d o f s e c u r i t y

c o u ld o n ly b e

e x te n t o f n in e ty p er c e n t;

o f B tr e a c th e y

lo o s e ?

Y es.

T he A c t i n g C h airm an :
v.ue n o t t i e d

an d o n o - f o u r t h o f t h a t m oney w o u ld

so th a t

a r e w o rse o f f th a n t h e y a r e in

in a. t im e

a tim e o f

p r o s p e r ity ,
yX —
x

Mr. H a m ilt o n :
t h i s m o r n in g ,

Y es.

The o u t l i n e

---------

th e A ld r ic h b ilh y

o f th e A
J

T sa w

o r o v io e d t h a t t h e y e a » C « v ^

^ - ------ ---♦
-

is s u e

SO p u r c e n t i n s t e a d o f 7 5 .
The A c t i n g C h a irm a n !
Mr. H a m ilt o n :

m ea su re,

as I

U n ite d S t a t u e

see
it

M r. H ^ - e s !

75 p e r c e n t on r a i l w a y b e n d s .

T he g r e a t t r o u b l e w i t h t h e A l d r i c h
it,

is

th a t

Or i t

H r . H a m ilto n :

w o u ld c o m p e l t h o s e b a n k s t o

go t o

s e c u r itie s ,

.A uy an d c a r r y t h o s e

w i l l n o t do t h a t t c

been av l i a b l e ,

6 ,0 0 0 b o n k s i n t h e

w ould b e p r a c t i c a l l y u s e l e s s .

F a l l S t r e e t ana buy t h e s e

-unu /WI

fo r about

p r o te c t

s e c u r itie s .

T h ey

t h e m s e l v e s now in an e m e r g e n c y .

governm en t b o n d s.

I f th e y had

and t h e : / h a d h a d t h e # 3 0 0 , 0 0 0 , 0 0 0 t o a

th e a d d it i o n a l c i r c u l a t i o n

t h a t t h e y h a d m a r g in t o

w o u ld n o t n e e d a n y e m e r g e n c y c i r c u l a t i o n .

is s u e

do, you




M r. M cK in n ey:
a b le t o
b ilj .»

I n o r d a r f o r a b an k t.t bo

avaL 1 i t s e l f

o f th e p r o v is io n s o f th e

w o u ld n o t t h a t b a n k h a v e t o b e g i n a n d ,

be a b le to

do|

80,

a c q u ir e t h i s

to be

goto

A L d rlo h

a s I t nxifdit

c la s s o f s e c u r it ie s

----------------- —
____ —<H
Ju4^uiQ.<*ra' - a l l t h e s e l i t t l e

l o c a l bonds — •

a n d c a r r y th em a s a s s e t s ^ t o h a v e th em w hen s u d d e n ly t h e
e m e r g e n c y w o u ld come up?
Mr. H a y e s :

Mr. H a m ilto n s a y s t h e y w o u ld n o t .

M . M cK in n ey:
r
its e lf

’^ o u ld i t

down w i t h U ia t

Mr. H a m ilt o n :
H r. G l a s s :
th e

sort

be w i s e f o r a n y Abarik t o l o a d

o f s lo w a s s e t s ;

I th in k n o t,

fo r

1n a oom m ^roi^JL
-

a co u n tr y bank.

Do y o u knew o f a t r u n k l i n e

o f r a ilw a y in

s o u t h w h o se b o n d s w o u ld b e made a v a i l a b l e f o v u s e u n d e r
r
pout- L,

th e A ld r ic h

b ill,

U ch

\

rfeq.nlref: t h a t

frhtty s h a l l h f t T t ^ f i r

---------------

a p e r io d o f t e n .. e a r s / p a i d i n t e r e s t / o n
B tO o fW

■ ;r V m i l "Qa.fi M n i l
i
i

Mr. H a m ilto n :
C f

cou rse,

but

k n o w in g .

c a p ita l

r-f—t^ r r H 4-?!

I do n o t know o f a n y r a i l r o a d

s e c u r ity ,

i n a n y s e c t i o n t h a t c o u l d m e e t t h a t r e q u ir e m e n t ;

p r e su m e t h e r e

'X

a ll of

T hat i s

a re su oh r a ilr o a d s .

in fo r m a tio n t h a t

T h a v e n o m ean s o f

I h a v e n o t b e e n ah L e t o

fre t.

?.fr# P u j o :

T hat i s

S en a to r D a n ie ls

s u b m it t e d a n am endm ent on t h a t ,

p r o te c t th e r a ilr o a d s
]'r • H ayes:
a id

a c e r ta in

ex ten t

of

t o b o c o r r e c t e d b y am end m en t.

in th e

so u th .

I f t h e A ld r ic h b i l l

c la s s

o f s e c u r itie s

s h o u ld b ecom e a la w

s h o u ld

.5 0 0 ,0 0 0 ,0 0 0 f o r c i r c u l a t i o n ,

w o u ld n o t t h a t h a v e t h e

so a s to

be t a k e n t o

th e

in y o u r o p in io n

o f f cot. o f g i v i n g a f i c t i t i o u s v a l u e




in th e m arket to t h o s e
H a m ilt o n :

M r,

s e c u r itie s ?

It

n a tu r a lly

str e n g th e n

th e m arket

i ‘o r t h e m .
H r. H a y es:

Would, i t

H r. H a m ilt o n :
it

w o u ld ,

’" e l l ,

but th e

H r. H a y e s :
em ergency,

A G overn m en t tw o p e r c e n t b o n d ,
as c a r r y in g c i r c u l a t i o n ,

w o u ld n o t s e l l ,

—• ji.<r c e n t —b o n d f o r m ore t h a n e i g h t y ,

H r . H a m ilt o n :

75.

How,

if

it

r a is e s

th e g o v e r n m e n t b a c k o f i t ,

or 109,

w h o w o u ld i t

w o u ld i t ?

I th in k n o t.

H r. IS cC rea ry :

l/Z

I am r a t h e r o f t h e o p i n i o n t h a t

I t w o u ld c e r t a i n l y make a m a r k e t in c a s e o f

v a lu e

i ”
‘lti wn-i—ft—

108

th em i n v a l u e ?

'fo r t h a t m any b o n d s .

its

bond, w ith

r a is e

q u a n t i t y o f th e m m ay m ake som e d i f f e r e n c e .

H r. M cCfceary!
w ith o u t

not

as it

d id r e c e n t l y ,

a governm ent

fr o m 75 t o 1 0 4 ,

or

on a tw o p e r c e n t b a s i s ,

n o t do u n d e r t h e sam e c o n d i t i o n s w i t h m u n i c i p a l
cprJ

b o n u s an d r a i l w a y b o n d s and s u c h t h i n g s
(-M

as th a tj

p o r c e n t b a s is ^ t V /o v J L d g i v e th em a f i c t i t i o u s
b eoau sa th e y -h a d -th e r ig h t

a fo u r

-t& -

v a lu e ,

s im p ly

o f t a k i n g and h n v l n g _ c i r o v ' l a t i o n >.

a e -m r e a s on f o r h a v i n g rhiem.---.
H r. H a m ilt o n :

I do n o t

t h e sam e p r o p o r t i o n ,
in en t b o n d ,

th o u g h ,

th in k
th a t

it
it

w o u ld i n f l a t e
w o u ld i n f l a t e

th e m i n
th e govern-

f o r t h e r e a s o n t h a t t h e r e w o u ld not, be t h e

con -

</(
l

t e m p l a t e d u s e o f t n *i numb a r o f thorn*
P r« M cC rea ry :
w e r e m ore t c
7/c-uld

W ould

be i n f l a t e d ,

not

tu rn

th a t th e

o u f f e r m ore t h a n u n d e r t h e

an a s s u r e d t h i n g ;
h a s a v e r y c h a n g e a b le

th e

e ffe c t be,

if

th e r e

aevern n on t a t la r g e
g o v e r n m e n t bon&m v /h ic h i s

a k i n g a r a i l r o a d b o n d w h ic h
s o r t o f v a lu e ?




7
J
Mr. K a r iilt o n :
m ea su re in t o

One o f t h o d i f f i c u l t i e s

o p t r a t io n

ta k e r a t a c e r ta in

th a t th o se

in p u t t i n g t h a t

s e c u r i t i e s a r e t o be

p e r c e n t o f t h e i r m arket v a lu e .

t h a t m a r k e t v a l u e mi f l i t h e i n o r d i n a r y t i m e s ,
m ig h t h e in t i m e s o f a p a n i c ,
d iffe r e n c e .

Now, w h a t

an d w h a t i t

w o u ld make a w h o le l o t

'W hether t h e y h a v e c o v e r e d t h a t

in t h e i r

of
h ill

or

n o t I do n o t k now .
Mr. M cC reary:
p a n ic

bonds o f

& & &

it

not a fa c t th a t

good i n t r i n s i c

in t h i s l a t e

v a l u e h a d n o t zfaa a n y
r*/?\

m arket v a lu e ,

c o m p a r a tiv e ly s p e a k in g ,

f o r d e s ir in g to h e ip

and

t h in g s o u t-w a s t o

one r e a s o n

t

in c r e a s e

ohe c o l l a t e r a l

v a lu e o f th o s e
p o in t

b o n d s b e c a u s e i f t h e y w en t b e y o n d a c e r t a i n
/
“ h e c o l l a t e r a l v a l u e c f t h e b o n d s w o u ld be sw e p t o u t ,

and t h e p e o p l e o f t h e c o u n t r y a t l a r g e
get

in to

tr o u b le ?

M r, H a n i l t o n :
M r. H a y e s :

Y es.

H ov l o n g h a v e y o u b e e n e n g a g e d i n b a » ik in g ,

Mr. H a m ilto n ?
ir .

and fa t h e b a s ic s w o u ld

•.

H a m ilt o n :

Mr* K a y e s :

H e lo n g h ave I

To p u t i t

a little

•
b een e n g a g e d in b a n k in g ?
m ore d i r e c t l y ,

y o u r k n o w le d g e an d m em ory ru n b a c k t o

t h e d a y s in I l l i n o i s

and I n d i a n a when t h e y h a d t h e r e d and y e l l o w
M r. H a m ilto n :
Mr. H a y e s :
it.

TJo,

s ir ;

T w a s b o rn

w as i t

Mr*. H a m ilto n :
Mr. K a y e s :

dog currency?

i n lR f>2.

B u t y o u m ay know in o t h e r w a y s in r e g a r d t o

I h ave seen v a r io u s s ta te m e n ts .

c ir c u la tio n ,

does

T h at w as a b o n d - s e c u r e d

n o t?
In som e s t a t e s ,

y es,

I n d i a n a an d I l l i n o i s

MT. H a m ilto n :

I th in k

it. w a s .

I sp eak o f .




39

Hr# H a y e s :

3u«* t h e w e a k n e s s o f i t w a s t h a t

d id n o t h a v e t h e

g o ld

Mr. H a m ilt o n :
Mr. H a y e s :

to r e d e e m i t ,

th e b ank s

a s I rem em b er i t .

Y es#

I h a /a n o t lo o k e d a t

b u t do y o u n oi, t h i n k

th a t th e

th is b i l l

a s a m en d ed ,

A l d r i c h b i l l h a s s o m e t h in g

ox t h a t w e a k n e s s ?
Mr. H a m ilto n :
to

^ ea d i t

I cannot

le ll^

I h a v e n o t had a ch an ce

c a r e fu lly #

Mr. H a y e s t

I t d o es n o t p r o v id e fo r
.

an y o th e r g o ld to

redeem

Mr. H a m ilt o n :

fiv e

it.

p e r c e n t or
*

I h a v e n o t h ad a. c h a n c e t o r e a d i t

care­

fu lly .
Mr# H a y e s :

V e il,

su p p ose t t

fu n d t o be p u t up by t h e
in g o ld .

M ould n o t

of str e ss

it

Of c o u r s e

t h a t bu s u c h a w e a k n e s s an t h a t
not to

in tim e s

c ir c u la te ?

I t m ig h t p o s s i b l y d i s c r e d i t

i f you have a f i v e

str e n g th e n

n o t p r o v id e any

governm ent t o redeem th o s e n o t e s

w o u ld b e l i k e l y

H r. H a m ilt o n :

d id

t h e note«5.

p er c e n t g u a r a n te e up,

it

w ill

th e n o te s .

M ?1 Jfaycp-t
y*

foutr/urntiil nrfrix1 .It rode jmr.a! -by thw -gn
n»

-m in t - i r
b u r q u e s tio n
m in d ,

and t h a t

is

r ta te

in s titu tio n s

th is :

o f s u c h an i n s t i t u t i o n ,

it

w o u ld

e x is te d ,

T h e r e h a s b e e n a dem and

be p e r m i t t e d t o

u n d u r som e p r o v i s i o n .

m ea su re i s

c u g g e s t e a n o t h e r /s t o my

I am a S t a t e
yet

is s u e

th a t

c ir c u la tin g n o te s

banker,

I do n o t b e l i e v e

and v i c e p r e s i d e n t
th a t

su ch a

a s a f e m e a su r e f o r t h i s

c o u n t r y t o a d e p t ^ .and t h a t c o n d itio n s
te n d t o l e a d u s b a c k t o t h o s e rifcgm t h a t f o r m e r l y
la c k o f u n ifo r m ity c f th e d i f f e r -




c u t o t a t a l a w s , —n o t on t h o g r o u n d t h a t t h e y a r e n o t
sa fe ,

s o lv e n t

as sa fe

an d so u n d r o ta te i n s t i t u t i o n s #

T hay a r e j u s t

an d s t r o n g a s t h e n a t i o n a l i n s t i t u t i o n s ,

d iv e r s ity

o f l a w s w o u ld make i t

hut th e

d a n g e r o u s for* s u c h a

m e a s u r e t o bo e n a c t e d *
Hr* P u j o :
by

repoa l
up t o

of

C o u ld n o t a l l t h i s
l.h~ l i m i t a t i o n

yO*0 0 0 * 0 0 0 a m o n th ;

c o u n tr y

/N

tr o u b le w t

w h ic h p e r n i o s
th a t

td m

be o b v ia te d
r e tir e m e n ts

th e n o tio n a l b anks o f t h i s

c o u ld

ta k e o u t $ 3 0 0 ,0 0 0 ,0 0 0 a d d it io n a l i f t h e y d e s ir e d
th e
t o p r e v e n t p a n i c s i n t h e f u t u r e , and p a y h b im p o s t

o r d u t y due t h e
!r «

governm ent th e r e o n

M cK in n ey:

n o t se c u r e th e
Mr. P u j o :

in a c t u a l c i r c u l a t i o n ?

The d i f f i c u l t y w o u ld b e t h a t t h e y c o u l d

b o n d s , w o u ld :it n o t ?
I w a n t h im t o

an sw er t h i s

q u e s tio n ,

C ou ld n e t a l l t h i 3 t r o u b l e b e o b v i a t e d fcp i f
c ir c u la tio n

bo t a k e n

c u t,

th e

fir s t*

a u th o r iz e d

i f th e b anks w ere w i l l i n g t o pay

h a l f o f ono p e r c e n t d u ty ?
!*r. K a y o s :
H r. FnjJo:

And r e p e a l t h e l i m i t a t i o n ?
R ep eal th e lim it a t io n

o f :'9 t 0 0 0 ,0 0 0 a m o n th ,

e n tir e ly .
Mr. H a m ilt o n ;
th e

I t w o u ld t e n d t o m ake t h e c u r r e n c y o f

c o u n t r y m ore e l a s t i c ,

ab ou t th e r e tir e m e n t
la tio n ,

but th e r e

is

tc o r a p id ly o f th e

a little

danger

bond s e c u r e d c i r o u -

w h ic h n i g h t w ork lMims m d i s a s t r o u s l y .

hr.

o:

A re y o u a w a re t h a t

it. h a s b e e n a r g u e d

b y t h e N a t i o n a l bunko o f t h e c o u n t r y

th a t th e e n t ir e

la tio n

b ecau se i t

w as n o t ta k e n o u t,

p r im a r ily ,

fic ie n tly

p r o fita b le ,

r e tir e

when t h e y h a d n o m ore u s e f o r i t ?

it

M r. H a m ilt o n :

c ir c u ­

w as n o t

su f­

and s e c o n d l y b e c a u s e t h e y c o u l d n o t

Y es




41

W ould
taotai

i r . P u jc :

a perm anent a d d it io n
c o u n tr y ,

$ 3 0 0 ,0 0 0 ,0 0 0 a d d i t i o n a l ,t o

t o t h e c i r c u l a t i n g m edium o f t h i s

be s u f f i c i e n t

to p rev en t th e o r d in a r ily

p a n i c s s u c h a s we h a v e h a d ?

Mr. H a m ilt o n :
b est

illu s tr a tio n

o f th e T reasu ry,
th a t

th e t o t a l

be

.

I th in k
o f th a t

r e c u r r in g

t h a t v /r u ld b e s u f f i c i e n t .

in

T he

fr o m t h e r e p o r t, o f t h e .S e c r e t a r y

j u s t p u b lis h e d .

It

s ays

—

I have i t

here-

i s s u e wan 0 2 9 6 , 1 2 5 , 4 6 9 .

T he A c t i n g C h airm an :

T h a t ip

th e t o t a l

is s u e

a t w hat

tim e ?
V r.

H a m ilt o n :

D u r in g t h i s

T he A c t i n g C h airm an :
I 'r ,

How much?

H a m ilt o n :

Mr* H a y e s ;
rn, .,
l i i o Ac t i n g

r e c e n t d is tu r b a n c e

$ 2 9 6 ,1 2 5 ,4 6 9 .

T h at

is th e

Cha i n o u n :

c ir c u la tio n .

I w ant th e

a d d itio n a l c ir c u la t io n ,

b y n a t i o n a l bank n o t e s .
h r . H ayes:
I t i s $ 1 4 0 , 0 0 0 , 0 0 0 , i n r o u n a n um bers*
The r e p o r t s a y s :
J lr. H a m ilto n : . The am ount o f c u r r e n c y w .iic h d i s a p p e a r e d
fr o m s i g h t d u r i n g
a s c e r ta in e d

t h i s p e r io d ,

s u b s ta n tia lly ,

n s c a n bo

fr o m n a t i o n a l b a n k r e p o r t s anci o t h e r s o u r c e s o f

in fo r m a tio n , w as ab out $ 2 9 6 ,1 2 5 ,4 6 9 ,

as fo llo w s :

And t h e n
t

he g iv e s th e d a te s .
The A c t i n g C h a irm a n :
h r* H a m ilto n :

C la s s :

I u n d e r sta n d

B u t how m uch w as ad d ed ?

T here w ere b u t

it.

' r . Hayes:

th e d is a p p e a r a n c e .

Y es.

T he A o t i n g C h airm an :
V r,

T hat i s

TToj $ 1 4 0 ,0 0 0 ,0 0 0

$ 9 7 ,0 0 0 ,0 0 0 , H r. H a y e s , a s




~A
X*

Mr. G l a s s :

Of in c r e a s e

T he A o t i n g C h airraan :
te n m illio n s
ififtna
fir s t

i n N a t i o n a l "bank c i r c u l a t i o n . '

/n d t h e r e w e r e m e h u n d r e d an d

o f g o ld .

M r*

H ayee:

c f ,J a n u a r y ,

LTr. P u j o :

The l a s t

sta te m e n t,

sh o w s ^ 1 4 0 ,0 0 0 , 0 0 0 .

YTould i t

o r w o u ld i t

n o t he p r a c t ic a b le t o

r e q u i r e n a t i o n a l b a n k in g a s r . o c i a t i n n s
in to

c ir c u la tio n

i f s u e d on t h e

a n am ount e q u a l t o

as w e ll as p e r c e n ta g e
H a m ilt o n :

of it ,

Y ou mean

to ta k e

th e ir

o u t and p u t

c a p ita l sto c k ,

a s wo now r e q u i r e u n d e r t h e la w ?
to

f o r c e th em t o

Issu e

n in e h un d red - —
IiT • P u J o :
th ^ ir

To f o r c e t h e n t o

is s u e

an am ount e q u a l t o

c a p ita l sto c k .
:/[r. H a m ilt o n :

I do n o t b e l i e v e

p o l i c y t o be a d o p te d ,

t h a t w o u ld b e a g o o d

fo r th e r e a so n t h a t you h ave

i m m e d i a t e ly c a u s e d a.n i n f l a t i o n

o f t h a t m uch m on ey o r

n o te s

and an i n f l a t i o n

ie

in to

our c u r r e n c y s y s te m ,

as dangerous a s
Mr# Hu j o ;

Why w o u ld t h a t b e an i n f l a t i o n ,

is s u e

any e x te n t

th e o t h e r .

s e c u r e d b y a g o v e r n m e n t bonct^fend w i-th-h s t h e i r
when t h e

to

o f a c r e d it

i f th e y w ere

c a p ita liz a tio n ,

s e c u r e d n o t e b y a b on d

is n ot

tw o h u n d r e d an d f i f t y

an

m illio n

ryvo A

in fla tio n

, w hen we

or th r e d h un d red m i l l io n

m ore d o l l a r s

t o m eo t t h e b u s i n e s s

o f th e c o u n tr y ?
Mr, Kr-dui.lto n :

I f you com pel th e

an i n f l a t i o n ,

if

fo r

;»s we h a v e j ir o p o s e d l t , ^ i s

in s ta n c e ,

you is s u e

in su :: o f i t

on t h e c r e d i t .

A

i n s t i t u t i o n s a s t o w h e th e r or n o t t h e r e
a n d s u o h an i n f l a t i o n

you com pel

’T ote i s s u i n g ,
o p t io n a l w ith th e

ie

th a t

in f la t i on,

w o u ld o n l y h e i n p r o p o r t i o n t o t h e




43

d em an d s o f t h e a c t u a l b u s i n e s s n e c e s s i t i e s
."a*. .’.ioCru&ri ;

R ig h t on t h a t

lin e ,

o f th e

c o u n tr y .

X w o u ld l i k e

to

read t h is ;
"On D ec em b er 3 r d ,
had d e p o s i t s
1 ±h<i
1

a p r o m in e n t l a n k

i n >rew Y ork C i t y

o f g o v e r n m e n t m oney t o t h e am ount o f

earns B ank a t t h e

s ta n d in g c i r c u l a t i o n
1 T he a b i l i t y
1
la tio n

1907,

. 4 ,2 2 5 ,0 0 0 *

same d a t e h a d a n o u t ­

of

$

o f s a id la n k to

1 5 9 ,0 0 0 .

ta k e o u t c ir c u ­

a m o u n ted t o

£ 5 ,0 0 0 ,0 0 0 .

I On D ec em b er 3 r d ,

1907,

a p r o m in e n t b an k i n

P h i l a d e l p h i a h a d G overn m en t d e p o s i t s o f
I At th e
I

sam e d a t e

it

2 0 0 ,0 0 0 .

h a d N a t i o n a l B ank n o t e s
1 , 0 0 0 , 000

o u t sta n d i ng
' Its

a b ility

to ta k e

out c ir c u la tio n

1 From a s t u d y o f t h e s e
1
th e d is t r ib u t io n
banks w as n o t
r e la tio n
mi /it

fig u r e s

it

a m o u n ted t o 1 ,0 0 0 , 0 0 0 .

v / i l l be s e e n t h a t

o f G overnm ent m o n ey s a s b e tw e e n t h e s e tw o

o n ly

g r o s s ly u n ju s t,

w h a te v e r to

be s u p p o s e d t o

b ut th a t

th e c i r c u l a t i o n

ta k e n

it
o u t,

h a d no
w h ic h

be a p r im e c o n s i d e r a t i o n m o v in g t h e

G overn m en t i n t h e d e p o s i t

of its

fu n d s.

C e r ta in ly th e o f f i c i a l

u t t e r a n c e s fr o m W a s h in g to n d u r in g t h e p a s t t v o m o n th s h a v e
b een fr a u g h t r i t h

a d v i c e an d e x h o r t a t i o n

to

out c ir c u la tio n .

To much f o r r h e t o r i c -

but

a p p lic a tio n

of

th is

th e b an k s t o

ta k e

th e p r a c t i c a l

a d v i c e w o u ld se e m t c h a v e boon q u i t e

in

an o p p o s i t e d i r e c t i o n .
* '”h e n
c ir c u la tio n
th e

b an k s,

it

’m s r u o o n t l y p r o p o s e d

im d ^ r e x t r e m e l y f a r o r a b l u

to

ir s u e

a d d itio n a l

c o n d itio n s o f p r o f it

e n j y t h o s e b a n k s w h ic h h ad n o t d o n e c h o i r f u l l

d u t;- in t a k i n g o u t c i r c u l a t i o n

up t c

th e l a g a l l i m i t w o r e

tc




a b le t o a v a i l th e m s e lv e s o f th e o p p o r tu n ity .
t h e r e h a s b een t h e

c le a r e s t

in d u c e m e n t c r e a t e d

fu tu r e N a tio n a l i n s t i t u t i o n s
u n til
fo r

H ere a g a i n

s h a ll keep t h e ir

th a t

in th e

q u o ta u n f i l l e d

o c n d .it i o n s f o r c e t h e G o v ern m en t t o o f f „r a p rem iu m

th e p e r f o r m a n c e o f a p l a i n
!:>• G l a s s :

T hat

d u ty

tc th e

it, a b s o l u t e l y t r u e ,

c o m m u n ity ."
to o .

It

cam e

u n d e r raj/' p e r s o n a l o b s e r v a t i o n *
V r, H a y es:

JTr. K am il t o r .,

p erh ap s you v i l l

regard i t

T w ont t o

a s a r e m a r k a b le q u e s t i o n *■
—

v/hat y o u w o u ld t h i n k o f a p r o p o s i t i o n
p e r m it n a t i o n a l b a n k s t o
str e ss,

u n d er a h ig h ta x ,

a d d itio n a l s e c u r it y
lie n

on t h e a s s e t s

\ -------- f

a s k you t -h i p^ a n d

o f t h i s k in d :

ta k e o u r c ir c u la t io n

in

tim e s o f

w i t h o u t p u t t i n g up b o n d s o r a n y

o t h e r t h a n t.e make t h e n o t e
o f th e bank,

th e f i r s t

s o m e t h in g a f t e r t h e m an n er

t h e y do i n Germany?
•r, H a m ilt o n :

I w ou ld w an t t c

see your b i l l

d r a fte d

b e f o r e a n s w e r in g tfc t .
H r. H a y es*

You s e e w h at my t h o u g h t

V r. H a m ilt o n :
v is a b le

or n o t.

it

th in k ,

Hr

w o u ld b e s a f e

o f th e b i l l .
c o u l d bo p r e ­

and. p r o p e r and a l l r i g h t ?

T h e r e s h o u l d b o som e r e s o r v e ,

I

a g a in s t th e n o te .

Mr. H a y e s
su g g e ste d ,

w o u ld be ad ­

O f c o u r s e I w o u ld h a r d l y know hew t o

q u e s tio n .

c a r r ie d

w hether i t

Do y o u t h ij ik ifei^t ru ch a b i l l

J r . H a m ilto n *
a n sw e r t h a t

I doubt

I t w o u lc d e p e n d on th e d r a f t

H r. j'layea:
p ared th a t

Y es.

is ?

S u p p o se t h a t r e s e r v e w o re J u s t a s y o u h a v e

t h • t any bank t h a t h a s tw e n ty p e r c e n t r e s e r v e

f ind m i rf i t i s s u e

up t o t w e n t y p e r c e n t o f i t s

b y p a y i n g a s i x p e r c e n t ta x . on I t ,
w i t h o u t p u t t i n g up a n y t h i n g .

c a p ita l sto c k ,

i n t im e r o f r t r e s s ,




?
0
H r, H a m ilt o n :

And n o a d d i t i o n a l l e g a l r e s e r v e r e ­

q u i r e d t o m e e t iv ?
:£r. H a y e s :

Ke^p a l e g a l r e n e r v e ,

b u t n o t p u t up a n y t h i n g e l s e w i t h
H r, H a m ilt o n :
th a t
you

is

th e b a s is o f our m ea su re,

th e c a p ita l o f th e
H r. H a y e s :

t h e G o v e r n m e n t,

That. ir, a g o o d d e a l a l o n g t h e

"beyond t h e c a p i t a l ,

rc

o f cou rse,

w ith th e

and wo t r y

to

sam e l i n e

e x c e p tio n th a t

c o n fin e

it

to

in s titu tio n s .

I m ean a c u r r e n c y t h a t c o u l d b e t a k e n

out

w it h o u t p u t t i n g up a fu n d o r d o i n g a n y t h i n g e x c e p t t o p a y
th e ta x to th e
’r.
is s u in g
^
fcc

governm ent w h ile

H a m ilt o n :

o u t*

V-ho w o u ld d e t e r m i n e t h e n e c e s s i t y

of

,
L e t th e bank d e te r m in e

it,

i f Hbcs; w a n te d

t h e ta x #

tiT. H a m ilt o n .
in e x c e s s
la tio n

is

it?

I.ir. H a y e s :
v t i'r

it

of its

W e ll,

c a p ita l,

o u ts ta n d in g ,

c r e d it e d

fo r

tn a t

if

a b an k i s s u e d t h a t

ana had i t s

fu ll

c ir c u la tio n

q u o ta o f o ir c u -

bank vrould i m m e d i a t e ly b eco m e d i e -

so d o in g ,

y r . H ayes:

'Thy

w o u ld i t ,

a n y m ore t h a n i t

w o u ld u n d e r

th e A ld r io h b i l l ?
Mr# H a m ilt o n :
is s u in g

it. on a c c o u n t o f t h e h i g h t a x .

H r. H a y e s »
if

T h e A l d r i c h h i l l w i l l d i e o r e d i t t h e bank

T h en why w o u ld i t

th e c u r r e n c y w as d i f f e r e n t

an y m ore th a n y o u r b i l l ,

in fo r m fr o m t h e p r e s e n t b a n k

currency.
Mr# H a m ilt o n :
am ount o f t h e

B e c a u s e we a r e l i m i t i n g

c a p ita l#

We e x p e c t a l i m i t e d

c u r r e n c y t o he c o n s t a n t l y

in c i r c u l a t i o n *

ou re to th e
am ount o f t h e

an d t h e p u b l i c w i l l

V

46

"become f a m i l i a r w i t h i t ,

as i t

i s now f a m i l i a r w ith th e

b o n d - s e c u r e d ban)c. n o t e s .
Mi** H uy o b 5

bi

Yo e } b u t i f

r e s e r v e b e h in d t h e s e ninuMPi
tlio r e n e r v o ^
th

3

lilu

uvor

t lio r o wus a t w e n t y n o r c e n t
tw e n ty p e r o en t n o t e s ,

o th o i* o b l i g a t i o n

n o te s w ere is s u e d j u s t

lik e

and

o f wlio botniC| and.

our p r e s e n t n a t i o n a l bank

circulation, t h e p u b l i c w o u ld n o t know w h e t h e r i t w a s i n
e x c e s s o f th e

c a p ita l or n o t.

T r . H a m ilt o n :

It i s b o u n d t o sh ew i n art' s t a t e m e n t

m ade b y t h e b s h k i n v i n s t i t u t i o n .
??r. H a y e s*
th a t

is

Oh, y e s ;

/

w o u ld show i n t h e s t a t e m e n t }

tr u e .

I t . H a m ilt o n :




it

And t h e p u b l i c w o u ld b ecom e a w a r e o f i t .




' L-tyolc i « x o s e i v o

-• »
,
Lituto

cicy |

cim t

n it , and t h e i n s t i t u t i o n

./ O\!Id nil 0,7 i n t h e

n/eoJrly

-./oriel I n s t a n t i , / te come

is-

c r o r l i t od?
r.

IIuyeB.

c>rc l a t i o n

W e l l f t h e o t h e r w ould sh ow , t o o .

v/ould c h o w .

Jr. JLu.ii.lto n .
ia x prevents fin

Our c i r c u l a t i o n

* ;i- f
’

p ' r f‘

/o n I d o h o . ; , b u t id. j l o w

d is c i e d itin g o f th e i n s t i t v i o n .

t tli o r ; , t o

t «e a i.o m i t

of

r •

i n c r e a s e s your r a ta
L>:

' ■'

•

C u ld i t

i 11 >fr i ~ " '1 •
i
^±sr
••

bo a v o i d e d i n t h i s

cf fio

v/ay?

th e

Leave i t

C u r r e n c y i n t h e T r ,'a sur;;, f
i

say

„ u e tUeiu o r n o t , u a a

c o n d i t i o n f o r n o t ^lakin ; t h o t a x s o h i

h.

W ould t h a t

i t i n .t i on a n y ?

•r •
*

t i t on.

V/hon y o u come t o t h a t f e a c u r c ,

you aro p i t t i n g
i.en t | in

is

of tax o n e -fifth .

..’-l jt ii : r t .o b o n k s Lo no riri.it t o d t o

ola.np.3 t o o

*lujuq , a n d i t

i n s o : n \m n f o r m or

ad l i t i . o n a l t w e n t y p er e m it o f s e c u r i t y
ot mr f a t

A h ig h ta x

You a r o r e q u i r i n g a n a d d i t i o n -

d i s c r e d i t s t h e b a nk o f i s s u e .
^

Y *ur

tn o

trem endous r e s p o n s i b i l i t y

con stan t

do s a n d s f r o m a l l

ove

I th in k

on t h a t h e p a r t th e

cou n try

./nol e r <, I,cs o t i n t o n e t a r e h i y 11 , and s o f o r t i i , f or t h e ;„ i v i *
•r
of th is
i dr.
P

o y e r c»'

a yc s .

. r . Land I t on #
r * hand
f

In o th e r

w o r d s, you a r e p u t t i n g them

e b m iking '

I r . hay e s .
. r . I laiaXi.lt on
th e b o n lin ^ b u s i n e s s .
,r .

H ayes.

It

i s i l t h o r o n o n , s o f a r v,s t h a t

is

con -

c c r i id .

, r . L c iio n r y .

■ u ld

it

not bo ju s t

as

r o fitu b la

. ■ ■ . .

....

fo r a




national bank to take, out this currency
at 2 -1/2 per cent, us it is for it to r cfcivo deposits at
3 per cent?

; r# Ha: . It on •
.
1

Jt would bo profitable if you could

keep thecurrency out, of course, bjcause you

are currying

the some reserve; but our content4 on is that it is not pos­
sible to keep the cur rone, in circulation at a 1 tinec and.
.
all seasons of the
It #

• c:lonry#

car.
Tk

y:

v think

• hero

are t es nhen wo nave
i.

more currency than we can profitably use?
r , Hamilton,

Tee; that is iinquestl enable .

It ^iles

r ,>

/lA^V

fY'SxA-s . S'"

) in those reserve cities b r the si 11 ono 1
r
/

r# liClenry,
cn n t t ink t aa
-

a^Wtrarrirr^
a greater

bill was in force non, do
ortion of tills issue would bo

taken oi f i■>:. iai. ly ?
\ c 1 od . e
X

•

ha

l i t on,

.r, licHonry#

J

sh ou ld th in k

-it.

■ 'i-.p.vn ;

yCS ,

Do you not believe, still further, that

six months from now ./hen business gets to going on, and there:
is a now boom, Tii^t t -or. will be even greater need for it
than there is today?
hr, Hamilton#

I t link you v/ill find inside of six

months that you hove too much currency now, and tnat you have
an inflation i n j t h i s country#
. # . c enry,
t

You will iijfch a business degression keeps

up; yes#
-r # ha: i It on •

17c are . n course of 1 1g . dat. on ri yh
1
ui
1

nev/ 1 you k n o w , and I think you . / i l l find that the interest
rates, and so forth, vi
/.11 swing the other way*, tnat there
w i l l bo an over a Irand an ce of money i n ushort tim e iikthis
i

\

country, on account <f the financial depression that has

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ M aui




3

n

b e e n 'brou, .it t o
o f course,

b iur i n t i i i a

on a c c o u n t

co n d itio n s.

Ever.

o f th e d istu r b a n c e

i-u n u faetu rin g

o f b u sin e ss has c u r ta ile d
of tee
It

is

rea to st tro u b les
that

i stru n t

it

c o u n t r y \ an d t h a t

o f our b u o i l o s s

in sfcttu tio ifcu id

i t s b u sin ess
,/ith

o f th e p u b lic , has a tendency to

se a so n s o f th e y e a r .

cir c u la tio n

the r a t e s

i n elo sticit.

in t

as i s

is

tie

cause
of

w m c e s s i v o r*
th at t

ay use

I f y o u h a d an e. e r

of in terest

more u n i fo r m t h e ./ o a r r o u n d ,

on

of y e a r s , t o cause

■
i"ul.!i^ !.." ai. i h u .—a r e c o m p e ll e d t o p a y f o r r o a r
~

oucy

c o u n t r y w ould be

exp i r i s n e e i n f o r e i g n

:h le r e t h e y iia v e s u c h c i r cu3. a t i on ,

c ouni.r:Los

r . G ille sp ie .
end n o t

th ere i s

t h e p e o p l e a r e p,.i, i n y - t h i e -bu r d e n t

in d iffe r e n t

lin e

o u r b u l k i n g s. s t a r ; t o r L .y .

th em t o h o a r d t h e i r m o n e y , a n d t h r u g h t h e
our s y s t u

!v ;r ;.

now, and

te n d s , at c e r ta in p erio d s

in th e r in d s

co m es u ' u v t ,

n

Yo u mean a c r e d i t

cr n u n c ,

ci r c u l a t i o n ,

\ . c r y enc-y c i r c u l a t i o n ?

r #Hai n i t o n .

Y es,

i r , lioi o r r a n «

V /iII n o t 1 1u i t, c e n t i n ■e a s 1 o n y « 3 t ie
x
..

C o v . r o a n t c o a t i n n as i n t . e b an k ! n y b u s i n e s s ?
Cr,

a m ilto n ,

r,

:_c: o r r a i l ,

certa in

p ori

Hov/ do
r at
.

is,

or m e a n ,
t is

in th e bank in ; b u s i n e s s ?

demand f o r c u r r o n e ,

ds o f t h e . oa r i s n o r e a p t t o

at

occur under th e
v
^\pvrrrv'~^t\

Ar e s e n t s y s t e m o f o u r b a n k i n g s y s t e m thc.ni i t
In o t h e r v/ords, t h e 0 V e r m o n t

so o o t h e r .

l a r o a m o u n ts o f t h e

p e o p l e ' s money * and a t

y e a r p ien t e c o u u l r

is

in the

in stea d

banks.
so

tr ea su r y v a u lt
If

it

t o d a y l o c k s up
a p erio d of the

demand i n . / c u r r e n c y , i t

cl site

is

o f b ein g d e p o s ite d

**v,s o u t o f t h a t b u s i n e s s

o f o r : . o f c rrcnc.

w 1-1- io a^ n id e r
-i

in i t s e l f ,

"
i

ia .a.,'.:-jUfiUe
n

jn tir c ly ,
w ou ld i t

l o c k e d Up
in

.a tio n a l

a n d ,/e
net

ad

fit

mm




r
o f the C o v en * e n t \

the needs
ent

r iu ch

> o t t e r Vi ,*i t i e

^res­

s ;/ s t e i n ?
h r , H am ilton .

e l .stie

and w o u ld r o o t t h e

tim e,

..—*

t, a t a r e

s u r p lu s , onoy

; u ld : e lp to r e l i e v e

It

si t u a t ion*
IX ,

0 a e : 1 rr. t

c ; .c r r ai i .

- r * H am ilton .
money the
and

co n d itio n s

oy t h e G overnm ant l o c k i n g up i t s

fr o m t i j i o t o
th at

The p l a n v/e ad v o c a t e w o u l d g i v e u s t h i s

co n d itio n ,

o cca sio n ed

t

r,

h e ll,

o f f s 31 t e o t : o r*

when t h e Co v . r n r x n t

em ergency c i r c u l a t i o n

o • would h a v e a s r t

r ,ii

o u t tnd s

w o u ld n u t v r u l y b o r e t i r e d ,

of

g o v e r n o r h o t .. e o n t h e

j O•

Lx,

x'jlen ry•

T you not " b elieve i t
>o

w o u ld he h o t t e r

t o h a v e a g r a d u a t e d t a x u p o n t h i s m oney?

vanc 1e

ud-

irate

m on th s, in order t o fo r c e
or

her i n s t a n c e ,

it

b a c k and c o m p e l

i ■ e la stic ity
>
—

1

t a re---- p i* i ; i,1' ' n * OTTV S,
l

i r • Kami 3.1 o n ,
you e n s u r e t h e

e ll,

jitire

sp o n sih i 1*t y -a i^ th e

w cm y< u a d o p t
.

nature o lx o r h i l l

...

r a d u a te d t .x,

and t row t h e

e cetwri t y , t ...a Li: a and t h e

oont

reof

i s s u e u p o n so: o i n d i v i d u a l ,
.r ,

ayes .

a: o u n t i h e t i s
to he o l w i t i c ,

You . i y h t r a k e

cu t,

r
it

S u p p o s e ; on b e y i n

/ r u d u a ed
a little

/.ith 2 - 1 / 2

t a x f o r tiie
More c e r t a i n

xmr c e n t ,

and

an*’ f o r t h e n e x t t e n p e r

it .

la ; 1 I t o n ,

S;..a31 s t a

. io n .

a

T h a t r i p h.t v a k e i t

latan* i s s u e t e n p e r c e n t o f i r a t ,

c "it r a i s o

it

len t

st

o u t , ~ d so o n .

d e p e n d u p o n tire 1 m y t h o f t i m e
It

a k o s w l d i t i o n u l conpliC c*-

\




5

r.

crin n e;, .

and lias b o en ^ a t

Yon bo H o v e , do ven n o t , t h a t t h e r e

t h e c r o o rm v i n g t i *o o f t h e

oa r i n t h i s
idl 3 if ^

o o u i t r y a n Anade iiuit.e a. o u n t o f o' r e . . 1 ■
.
t :d o r
v

:-r<i; n jr

no

r .

. 'I t i .
M /vo 9
*>&)rr<^^C£4
>^
h ro a o i h u n d r e d an d
is

—rr— rr—t t H—
**r

..

41

in

'l ,
;

I

a t

J 1 ton.

ir .

hcKAnney.

i ft;

ra ise

b ill

on ab le

to th r o e

r ^ id f

Hundred

tro u b le t lu t

11;

.

lllio n

o f th e

v/o p a s s e d

f t h e L ioniy t a t

1

o m
<

./o r e g H d t o g e t

l «j.*
x* oi

Y es, s ir ;

its

a ticn ,

and t o

su p p ly
T i^
(rtrv>
o f m o n ey t h a t i n

v alu e?

t h a t in v e r

im p ortan t#

Do you. b e l i e v e u n d e r t h e
O o m is s io n adopted that
currency?

. r . haul I t on.

’ r l l % do
c

ta n o , Ti n o t 1 1 1 (>

ndy t h e s i t

as to

ijn

it.

v/as no c r i t i c i s m .

aj.. .os L a s

. a y h o ,7 a n y n o t e h o l d e r

ur uncut

< i

3 any c r i t i c i s m

And t h e r e

a su sp icio n

t h a t .o u r

ary su sp icio n

'1 n

.;o s h o u l d s u p p l y o, q u a l i f y

4. r . ; .cK in n o y •
■
is

m illio n

H o | t,.a ;

tt# t »
>

r . H am ilton .

t

M b *an

He o n e «rao a f r a i

im p o r ta n t, in t r y in g to r

n o v/a;

u

a t no t i

c ir c u la tio n #

iioi'o T o n e y , t h a t

s) air o ro j m o v in g —bi j c V

In th i s j s t

h er . -a s

y o u no u s o l . to v e

'.i o

—a** r e q u i r e d ,

r . ; cX inncy •
th rough,

1di

is

,,r e v i s i o n s

th ere

Can y o u f i g u r e

cou ld

of
bo

out in any r e a s ­

cou ld lo s e ?

o ; I c a not

p o s s i b l y dc s o .

i n f ^vor o f o u r m e a s u r e -4-®—t t r t r r ^ a s

A nother

cor-p a r e d

riih

a

b o n d soc* r o d c u r r e n c y m o a s u r o ^ l a n d i t h a s b e e n f u l l ; den e n ­
tile
s r ^ t e d i n n y , i n d f r o m f i g u r e s t h a t v/ero ^ r e s e n t id a l i t t l e
a h i.: a

is

th at

i n B apt*m u o r //e a u d v b b l , 0

Op- <

oh b e n d - s e c u r e d c i r c u l a t i o n , and. up t o D ec em b er ^aud t h e y
yore o i l .

abac o o in c r e a s e tu a t c i r c u l a t i o n § 5 0 ,0 0 ,0 1 0 ;
/o h
a d on .Teal v a r y .TtErt^ J b e l i e v e t h e s t a l e u e n t t n u t t e y u i t l e -




G

i

n p r e s e n t ;d h e r e sh e ./nd t ;*at t <o

4 1 9 0 ,0 0 ,0 0 0 .
r .

5 .a t uuo a f t e r

la. e s .

t r o u b l e was m o s t l y o v e r ,

*^140 ,0wC , •)Of' .

j x . H am ilton .
It

th e

had u n i n c r *ase o f

W■ 1 , t h e
1

sum t o t a l w o u ld he v l *0 , 0 0 0 , 000
?

b e e n 0 1 4 0 , 0 0 0 , 0 0 0 , $id f r o m 'Hecohber 2 o r 6. t o

w o u ld h a v e

"One ember f i s t , s o i t

s h o w e d the.-!

deton Inin ■ val oi and

t !u i t m e t h o d o f . l a n d l i n g i t ,

I : ig sec nrlt i e s , is ft Tory slow i

process.
j r . ha, o s .
0 4 5 1 ,0 0 0 ,0 0 0

$ 6 9 1 , 0 - 0 , 0 0 0 on t h e

on t

fig u res?

o 1st

Mr•

here not t h e s e

i es«

Mri

5 5 1 ,0 0 0 ,0 0 0

i n S e p t e:. h e r .

a t w Id make

. wc* .
K
>

w eek o f t h e

t o

•

a r . haa-i I t o n .

r.

o f Septem ber•

o f J a n u a r y , and

•

. r . H a m ilt o n .

la s t

1st

140,000,000 Lnoreas*#

*

^ 1 4 0 , 0 0 0 , ;0n .
And a l l b :t a b o u t

1 i f '/ ■

m illio n

f

it

i n th e

year.

__ ] , n.

T do not rant to take up a l l

our ti

,

0 . f l an
r.

C la s s .

L e t a e a si: o n e q v o s

you t o l l me b i the Aldrich B i l l ,
taxed

cut s i x p e r

cent,

i o n r* ; it t h e r e .

Can

ritl i t s e irgentfj ourrenoy

cm I d or f o r 1 an;

r ’10 o f i n t o
-

crop

m o v in g p e r i o d ?
Y'-' *

T do n ' t b o l ’ ev a t iu.t a l i t r*ii t a

M il

,/o u ld

over

oa o f ,.n;/ j i i a t u r i u l a d v e n t a *e t o f 'iv a u s a c u r r e n c y a t t h a t
*
t.i: o -----a b n d - a o c o r a d c u r r e n c y .
It .

-v o s ,

I t h i n k y our s u g g e s t . i cn i s

th e : an* be t ..lo h an k t a k e s
In u re
It

w i l l ha a ru n on i t .

w ill h
r*

j

cu t

th a t h ig h ta x e d c i r c u l a t i o n
±

at

is

u f lu g c f d i s t r e s s , .rig h t
a ti l t vil.

If

it

c o r r e c t th a t

a h eu t th e s i t u a t i o n .
off*

.zero a n n o u n c e d

uG ;,orrc */ L i a t Kevr




7

Y r k v/us j o i n e ;
in I l l i n o i s
r,

j

^s ;u c t h a t k i n d o f n o t e s ,

w o u l d car/. o n c e t o t r a n s f e r

Kayes .

v.

low, l e t

o f trio d i f f e r e n t h i l l s .
al

b a n k s , when t n i s

t a k i ng o u t n o t e s

:i:f y o u di d n o t *

no t ^ k c t h e p r a c t i c a l

U nder t h e

o r i fiK c r i s i s
id

t.o a v a i l t l r an s e l v e s

us f o l l o w

our b ~ a „ n c e s .

Y u w o u ld be f o o l 1 s

C riiu r *

a ll

present

s s te m o f nuluion-

came o n , t

i n 2.a n y i n s t a n c e s

u

o f the

were u n a b le

p r iv ile g e

that th e .

on a c c o u n t o f t h e f a c t

tir.ni t h e y would, s e c u r e n o t e s

th e m •

It

aval

e c a s e was c o n c e r n e d ,

.L a b i

oc bu c j

jio w
to

w o u ld pl<<,ee t.xox;

l ,o
.

secu re th e

a f t e r t h e y h.,d b o u g h t

i n a wo r s o cow di t • o n ,
t nan t h e y

of

./oriel h a v e

i.o t a k e o u t riore Money fox- t h e g o v t m i ont b o n d s t o
*
o ir e v l o t i o n

w ork in cs

/ore

fu r as

i n b e f o r e ; and I

o .iut Sv.w aj cr i •» i c i mu w o u l d a p p l y ■ o a s u r a b j» y
.
*
•

t h e A l d r i c h 13111.
*'•

ilto n ,

If

w ill,

if

th

.ft

if]

t. u t i u o

of

p anic to p ro cu re t h e n .
e r . Y cy in n ey .

'fe ll,

under your

b i l l ----- T s h o u l d s a y

iiiy b i l l -----r . huni l b o u .
T
ui

.

V os,

.cJC in u ey.

o n , and u n d e r

t i i

it

is

your b i l l .

U n d er : y b i l l
s

3 ii a t

o.(

you c o u l d

l a x a t i

on

m*

secure
-r -

n j

c irc u lu -ud

y/y;

p u t t iny; up TUve p e r c e n t a n d a l l

t h a t to a -r o u te r auount than

you

off

ouy o u t ,

^ mi

tra P u s
ax

yv

you would

^r^<Ui==^

m i d

cr—

<»
r

than

vo f o r e ,

r # L cK in n ey#
m

ei r e 'O a t io n

,

.

:fr. ila i l f o n .

t at

?o

be b e t t o r

You co I d / w o t t h e

:r.or ; c n c y .

You would y e t more m o n ey on n a n d t . r t i i ( ; h

t i i o d , a l t h o u g h y o u \ / o u l d h a v e t o pc<.y t c

yet th e ud-

tv i t a C o f ill a t .

r.

c. or run.

ow do . ou f i ;ure t «at out?

Suppose




y o u v.v/ut o n e

u n d r e d m u n i c i p a l b o n d s -------

The A c t i n g C h a i n .an*

-o i s

t a 31:1 n,

about h i s b i l l ,

wild

n o t th e A ld rich B i l l .
h r . hcIC inncy,

U n d er t h e p r e s e n t p l a n ,

I w o u ld 1i a v '? t o b u y
and I w o r l d h a v e

overnnient b ond s t o y e t

to pa;

a s you c a n s e a ,
hie

x )i^ -

yromiujTi t h a t . / ' u i d

I w o u ld be a l l o w e d t l i o ai o u n t o f t l i o f a c e

ci r c u l a t i o n ,

r e v a il,

and t h e n

va lu o o f t h e b o n d s .

T 1l a v e p a i d o u t J ^ r pory con tu . ge m ere i n Are.; ium i uni I
w o u ld g e t ; s o T w ould be w o r s e o f f t h a n b e f o r e
ly s e l f
an,

of it .

U n d er t h i s

b ill

T

I a v a iled

u l d n o t a avo t o b u y

bonds.
. jr. H a m ilto n .

..aii,

B efo re you c l o s e your

I want t o r.u]ce t h i s

s u g g e s t io n us to th e
the p u b lic .

su g g estio n to you.

It

s t r e n g t h o f t h i s m easure

J am s a t i s f i e d

port t h is b i l l

,e tin g ,

ttuh. i f

th is

(ia n tle-

is

sim p ly a

i n t h e n ine! o f

Con i t t e o

sill

re­

t o t h e H o u se w i t h a n y s l i g h t n o d i f i c a t ion-iafc

J
i -ay d jem otdvi s a b l e , y o u -*411 f i n d —
a t th e
th is

sujjport *

cou n try.

sane n a tu r e .
a tten tio n
hhe,

to

«
ib is

wi 3.1
..su re

In tim e s
its

had p l e n t y ,

is

wi 11 b e s ur *r i s e d

avo from ov r
lik e

ever th in g e ls e

of p ro sp erity ,

and. d i d iv t t h i n k t h e

b e a f f e c t e d b y a panic]::-’ c o n d i t i o n .

C lan ged ,

more s t u d e n t s
clro cU...f r ; o f .
tio n ,

o f fin a n ce

c o u l d i n an;

.,3 1 k n o w .

in tn e U n ited s ta k e s

fu rn ish ; u l e t t e r s

d o r s i n g t h i s m e a s u r e , ( f i f . on

ad t h e

p ise

Avon s ’ . ee t h e m o o t i n g
n

hov/ t h e p e o p l e ..a v o b eco : o a l i v e

and J c< o l d

no

rr eh i j a s u r e s •

C ity th e c o n d itio n s

,s y o u me: h e r 3 o f C o n g r e s s

of

of the

t h e p e o p l e ... i d

udvc c a t o s , e r k h o s o u d v o c a t i a -

o f orr co n v en tio n at A il.e it ic

sectio n

b
t i

ave

lie e r e a r n
t nail g e n

to

ever

tu e s i t u a ­

t a) t LonsuncU e n ­

e t

c o n s i d e r tu u u ^




c a d liu c ld n : up t h e p o s i t i o n
y e a r , aiid b y t h i s

a n d i u g t h a t c o o c k in d
r . K a y o s*

t o s i t u a t i o n , a n d th e ;

of le g is la tio n

tn at

i o | c a n bo p u t i n

are d o-

o f tho

* r • . .a 03 .

In o th e r

. n t h ttr h s

in t h i s

no l i d s , i t

it*

*row ith o u t

and i t

o p tio n a l

./n e th e r or n o t

p r iv ile g e s

;i t h

o p era tio n

c o n d itio n t-^ tt e x i s t s ,

b an k in g i n s t i t u t i o n

th u ] .s e fv o s

o onn a c t * on

f o a t u r o s in conn c o t io n

is

d istu rb in g a s in g le
t i l a ii

j a a o ^ le

no Iv-id.

Aiidam t h or t M n g i n

gos.

iji-ood l e g i s l a t i o n

j'

to

.

T a t .is t r u e .

- r , 1[a: : i I t on •
str

; o u r (C
oil i t ,t o o 1 .s t

c o n m i t t c o a t t oo p r e s e n t t i m e .

o f th o o o u n try a r e a l i v e

Ono o f t i e

ta k e n b;

h

is

)V 'r a v a i l

m easure.
is

th ere

if

to y

nood

it?
. X . 1[ami I t on .
r.
b ill

*

It

is

t ;e r e i f

I do n o t

h e a r from t h e i r

v/ao i n t r o d u c e d a t t h e
a sin g le

letter

j

b eliev e

tl r o u g h t h i s H o u se u n t i l

d istricts

L i iey n e e d i t .

u ./ill

ever g o t any

i»-t.w . •'*< l/wr s f r o m t h o d i f f e r e n t

const itu o n ts •

lo s t sessio n

.Tom my d i s t r i c t

oj£

How, when t h o b i j l

C ongress,

re la tiv e

I d id n ot g e t

to th o b i l l ;

I i n q u i r e d o f t h o d i f f e r e n t mo b o r s o f my d o l e , a t i o n ,
a sin g le

l e t t e r had t

r. i
br ug t

C;

i rran,

to b a r

And t n i o

s.u ;o b i l l

was i n t r o ­

an d a r g u e d on t h o f l o o r .
. lea .

lo.v, u n t i l t n o r e

f r in e v e r y s e c t i o n

member o f C o n g r a s s ,

and n o t

ey r e c e iv e d .

Tho A c t i n g C h a i r m a n .
duced, p r a c t i c a l l y ,

an d

o f the

is

so: c _ r a s s u r e

c o u n t r y , on e v e r y

I do n o t b e l i e v e y o u . / i l l

succeed

in g e t ­

t i n g a b i l l t . r o u g h tho b o u s e .
The A c t i n g C h a i n . a n *
e b ill,

xr .

T t h i n k o n l y two o f u s s ^ o k u on

F o w l or and ] . s e l f ,

^bcut a . jar a g o .

Lew, l o t




1 0

me a s k y o u o 10 f u r t h e r
uii a o o : : i t t o o ,
cou n ters,

rp
1

Suppose

we s m o u l d s e e f i t ,

t o ralco y o u r n o t e s r e d e e m a b l e

or in s o o

r.

qi a c t i o n .

tu yes.

r e d o : i p t i o n a o n e ;/,

Or w i t h t h e

in

o v e r ; o r ran

/ o l d -------

C o n t f fHLl^ r o f t h e

C urrency, the

r o a s 1.*r ; ■ l a p < t r t r ia a t *

t h e A c t i n g Chub n an •

h o ll,

w or over i t

sh o u ld b e ,

rc-

deem ubio i n y o l d .
_.r* H a m i l t o n .

’To w u l d n o t h a v e an;

o b jec tio n to

tlia t,

what e v e r 9
lee

A ctin g C a ir ..a n .

th e bants to
it

11 .at i s

redoor, t h e i r

own m o n e y i n g o l d ,

Y es, i f it

the A ctin g C a ir m a n .
p ro v isio n s

in stea d

o f ad d in g t o

i.r .

a ll

Kui i l t o n .

_e ^r e p o r t

is

t my i s s u e

demanded#

And i f t h e y do n o t

o f th e low ,

: out to r a i n t a i n

then th e r e

is

issu e

it

under

n o th in g t o r e l i e v e - -

t h e b u r d e n now p l a c :d v on t h e C o v e r n its

m on ey u p o n a g o l d b a s i s .

O ur

c o m m i s s i o n w o u ld n o t

o f —t;hu O u m m c j

^ urfer a 1 Aa.; oo l a t - i - n ^ r e f e r r e d
rji
o
is

if

^

i.r* l i c n n i l t o n .

th e

11 nr owning t h e b u r d e n upon

to

t*.

th at.

Cuj imiTib'Tbn u i S -tow—f\. u r i o a n
in

r.

Komi i t e m 1 s r e m a r k s ,

a s frH o w s

Cyufc-

/wvv^jh^.

A^CLaa.—
$-o~vW \

■ B

ob ject




11

a to ] t

io

s'.

al

-r id | :.:L Seoo id

r . Cox.
a b o u t t ho

*

; h;JT

op

v

ttio nal Bank*

.

oox,

fits •

*on , 6#

i r , Chairman, Mention ./as made t i i s %

ruing

..on i t I o n t a r o n b y t h e i o - b c r s o f t h e Cot., i n n i o n ,

qs p

ecia lly i r.

in

''The

horyan•

X iin d a lo o te r

.rr*1 ixi

’c o n o m i s t " , p u b l i s h o d i n C h i c a g o ,

on t h e A l d r i c h h i l l ;
taken p la c e

I th in k i t

o f t h e Corn’i t t e e
r .

and i n v i e ;

if

ayes.

r.

.'cr^ an

January 10,

1C0G,

o f th e d i s c u s s ion tiu it has

j o u l d b o v e r y u s e f u l t o t ie l a b o r s

th at

./ere ad d ed t o

J vzould l i k e

The Cxiairr un.

j

your h ta r in g s to d a y *

t o have i t .

T a t i a y bo

i n s e r t e d i n t ie r e c o r d .

(The l e t t e r a b o v e r e f e r r e d t o ;r 11 bo fc uud a t t h e en d
of

r.

C o x 1s r e m a r k s * )

. r • Cox.

I

.ait

no s a y t h a t

it

m u s t bo d.i n t i n c t l y

X
a

u n d e r s t o o d t h a t t h x t -Jrrrs t .e o r i g i n a l
th a t

aflti

A ld rich h i l l .
in r a t
.1
u .t'. I.

ir

J ,,
1 j

»

U

' lire

e x o ;pt ' o n a l
.t th is

city
•

d.i l •lot ; C he t h e

clea ri ng

h o u s e o ^ r t l f i ecu* t d u r i n g t h i s ± ; r i od o f d i r e u n i o n and p a n i c .
.
' o mot a l l
res,

a.id

o r
ilo

in

v/.

1i s c o u n t much ; a p e r ,

id a c t

Spaa! .iuy t f my cun bu.ak,
soon a s i t
b a sis,

jo t- ok c a r e

./as l e a r n e d o\ t a i d o

in stea d

ev o c j j a y .

ob l» g a t i o n s

t* .a t

jo

Thor o ..o r e no fw-il-

o f o nr p e o p l e .

>ot .-s

j u r e on a c u r r e n c y

o f a, e l i a r i u ;> n o ne c e r t i f i c a t e

d e v i c e known t o n a n was nacio t o g e t

»-*--•»■ k ' ■ -f- <«-o
io c

our laoney,

b a s is , every
arid wo had t o




12

s c o n t .a

vor;

c a r efu lly *

;>
vfc T

id. .1. :d a V ^ . . r r r T - t r ^

icrii'i i w o d i t . i o n h e r e ./as due t o t h e f , , c t t h a t t n o r c i s a f j r e a t
d e a l o f p u b l i c m o n ey p a i d o u t h e r e ,
Treasury

dep artm ent,

‘ ad i a f i a t
-

rre a r e v e r y n e a r t h e

<7w*y, . v i t h t h o s e l a r y e

bv 1 1 d ; ;ys y o i n y l a n ^ >;e ./era a a l ) t o

n e t the: o b l i y v t i e n s t h a t

came u^on u s •
I havCxhCT# ... a . / • ;
m

ray i p o c k e t \

3

of

t lone l o c a l 1 &nks

....

'■ *..v

.uo

rad Lt s a d e up*

:V ,r i

• :nu
.

i t YfaTriocrC"t h e c o n d i t i o n

h
' *
. >t*A— ►*/& c

’ rin i

o f e c u s id cru ol.e i n t e r e s t ,

«1 is h o 4 |

,rz

Ivo

it . n . . ut>

i n t h i o vra:*y t - r . i i t

s! 10,/S

wl l > . t : t j I n c r e a s e s and -n.a, b t. --a d e e r a o s ..ar.i d r r i n j a yd v o n
ct
In
p erio d .
uvor, i n s t i t u t i o n i n t h e c : t. , e x c e p t ! a g t h r e e , t h e r e
decrease
o f * 1 ,6 2 0 ,0 0 0

i n d e p o s i t s ^ -**tf < h e r a
^
in n a tio n a l

a n d V1 »:> 03, 0 ; 0 i n t r u s t
I ./ill

>anks; * 1 7 0 , 0 0 0

com p a n ies.

lea v e

a yen e r a ! d e c r e a s e

t sat

in

Sv//in,;s b a n k s ,

..he p e r c e n t a g e s a r e u l 3 0

v ith th e O o n w ittse,

if

it

is

d o sir ed .

( l ie l e t t e r
is

as fo llo v /B t)

of h v o c

0.

d’e r ^ u n ,

r e fe r r e d to by

j

r,

Cox,




6 ? s~
13

ahe

A c tin g C a ir m a n .

T could l i k e to say th a t the

Co ii.ittoe lias boon very m cli pleased srlth the manner in

■ o ch each queoti on has b e e n promptly and sq u a re ly answered,
u
.
v o r have not d o d g e d anything,
jr.
m ittee

H am ilton .

fo r the

I v/i at

whether ic ca m hard or e a s y .

to

ex p ress i y th u nk sto

c o u r t e s y and p a t.to n e s y v

o-'oh t c a d d t h i s

t h o u g h t t h a t Has J u s t

ther

our i o ,,s u r e .

support o f

of t h e c le a r in g house
c.ia l c e n t e r s l a s
s i t rlio n s;

a n d •;h 11 e t i e ~r Iiu v c
.

xare rheum; and T

h ,

t

th e

issu in g

d iffe r e n t

o f the a s s e t s
1,a e * *s c u c d
.*

corn .or-

o f th ose

in ­

/* Mi c-.vest i o i ? :j 1 o
»
a

i s slio i/n 1 1..at su c h c o r . or c i a l a s s c t s a r e

ood s c c u r i t ' f o r a c r e d i t

. r . Hayes.

Com­

o ccu rred to m e, in f u r ­

c e r t i f i c a t e s by the

show n t ie v a l u e

ui 1 1 u c i t y , ; *e t i t

1 at

th e

note

issu e d .

I t sno./a t a t t.«e pe opl a i cere so r e yard

G. . 0 iii •
j

ir.

Hamilton.

Y es, and the people so re yard them i n

time of c . oryency.
m

(fhe ficiirnittoe thereupon adjourned s u b je c t to the c a l l
of th e

0 ia : r* a n • )


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102